Long-Term Corporate Bond Investing: Which ETF Delivers Better Returns for Your Fixed Income Portfolio?

The Core Question: Fees vs. Performance

When building a best fixed income investments strategy, corporate bond ETFs like the State Street SPDR Portfolio Long Term Corporate Bond ETF (NYSEMKT:SPLB) and the iShares iBoxx Investment Grade Corporate Bond ETF (NYSEMKT:LQD) frequently top the list. But which one actually serves income-focused investors better over the long haul? The answer depends entirely on what you prioritize—and how much you’re willing to sacrifice.

SPLB wins decisively on cost efficiency. Its 0.04% expense ratio obliterates LQD’s 0.14% fee, a meaningful difference when compounded across years. SPLB also dangles a higher dividend yield of 5.2% compared to LQD’s 4.34%, making it naturally more attractive for investors who crave immediate income. Yet this apparent advantage comes with a catch that becomes painfully obvious when markets turn volatile.

Where the Similarity Ends: Duration Exposure

Both funds restrict themselves to investment-grade corporate bonds, filtering out riskier debt securities. But their maturity strategies diverge sharply, creating fundamentally different risk profiles.

LQD takes a comprehensive approach, capturing the entire maturity spectrum of investment-grade corporates. Roughly 22.3% of its holdings sit in the three-to-five-year range, while 16.6% occupy the five-to-seven-year bucket. This diversified maturity ladder provides ballast during interest rate uncertainty.

SPLB, by contrast, goes all-in on longer-duration bonds—exclusively holding securities maturing in 10 years or beyond. This concentrated approach explains two paradoxes: why SPLB’s yield runs higher (longer bonds compensate investors for extended duration risk), and why it suffered deeper losses when rates climbed. The fund’s portfolio encompasses 2,953 holdings with an average fund life of 16.8 years, stretching deep into the future.

The Performance Reality: What Actually Happened

Over the trailing five years, the performance gap tells a cautionary tale about duration sensitivity.

A $1,000 investment in LQD would have grown to $1,801.52, while the same amount in SPLB would have shrunk to $1,686.55—a $115 difference that highlights duration’s double-edged nature. LQD’s maximum drawdown reached 14.7%, troubling but manageable. SPLB’s 23.31% maximum drawdown nearly doubled that, creating a punishing experience during periods of rising rates when longer-duration bonds face the sharpest repricing.

The best fixed income investments for long-term holders often require weathering volatility, but SPLB’s steeper drawdowns underscore why its concentrated bet on long-maturity corporate debt demands conviction and longer time horizons.

Inside the Portfolios: What You Actually Own

Both funds track investment-grade U.S. corporate debt, but their holdings paint different strategic pictures.

SPLB’s largest positions include Meta Platforms (NASDAQ:META) Senior Unsecured bonds maturing November 2065 at 5.75% (0.39% of fund), Anheuser Busch InBev (NYSE:BUD) Company Guaranteed debt due February 2046 at 4.9% (0.38%), and CVS Health (NYSE:CVS) Senior Unsecured securities expiring March 2048 at 5.05% (0.33%).

LQD holds similar top-tier names—including a BlackRock (NYSE:BLK) cash management fund position and substantial allocations to Anheuser Busch InBev and CVS Health—but integrates shorter-duration bonds that dampen volatility.

The Risk Metrics That Matter

LQD’s beta of 1.0 signals it moves roughly in line with the S&P 500, while SPLB’s beta of 2.1 reveals nearly double the price sensitivity. This amplified volatility stems directly from longer duration, making SPLB significantly more reactive to macro conditions and interest rate expectations.

For context: when the Federal Reserve signals rate increases, longer bonds suffer first and worst. SPLB’s concentrated exposure to 10-year-plus maturities means investors absorb that repricing immediately. LQD’s broader maturity mix provides a natural hedge.

What This Means for Your Investment Decision

Investment-grade corporate bonds themselves offer compelling benefits—they generate predictable income streams, deliver yields typically higher than government bonds, and add portfolio diversification. The question isn’t whether to invest in corporate bonds, but which vehicle maximizes your specific goals.

Choose SPLB if you:

• Prioritize yield above all else
• Have decades before needing access to capital
• Can tolerate 20%+ temporary drawdowns
• Benefit from lower annual fees compounding over very long periods

Choose LQD if you:

• Seek smoother performance and lower volatility
• Prefer broader maturity diversification
• Want proven resilience during rising-rate environments
• Value consistency over maximum yield

Neither fund perfectly solves the bond-investing puzzle. SPLB’s 5.2% yield and rock-bottom fees create compelling mathematics for patient capital, but SPLB’s 23.31% maximum drawdown and weaker five-year total return reveal the cost of that concentration. LQD’s superior downside protection and 1-year return of 6.2% (versus SPLB’s 4.35%) demonstrate why stability matters when constructing best fixed income investments.

Key Metrics at a Glance

The maturity spectrum divide explains everything: LQD diversifies across all investment-grade maturities, while SPLB concentrates exclusively on bonds with 10+ year terms, creating higher yields but amplified interest-rate sensitivity.