Long-Term Bond ETF Showdown: Which Delivers Better Value for Income Investors?

The Core Trade-Off: Cost Efficiency vs. Portfolio Resilience

When building a fixed income portfolio with long-term bonds, investors face a classic dilemma. The SPDR Portfolio Long Term Corporate Bond ETF (NYSEMKT: SPLB) tempts with rock-bottom fees and mouth-watering yields, while the iShares iBoxx Investment Grade Corporate Bond ETF (NYSEMKT: LQD) wins fans through proven stability during market storms. Both funds focus on U.S. investment-grade corporate debt, but their strategies diverge sharply when it comes to maturity selection.

Breaking Down the Financials

SPLB’s 0.04% expense ratio puts LQD’s 0.14% fee to shame, and the income pickup is undeniable—5.2% versus 4.34%. For yield-hungry investors, SPLB immediately looks attractive. But that beta tells a different story: SPLB’s 2.1 beta signals nearly 50% more volatility than the broader market, compared to LQD’s 1.4.

Performance Under Pressure

The five-year performance picture reveals where each fund truly stands:

• LQD 5-Year Drawdown: (14.7%)
• SPLB 5-Year Drawdown: (23.31%)

A $1,000 investment five years ago would have grown to $801.52 in LQD versus just $686.55 in SPLB—a meaningful $115 gap. This performance divergence isn’t random; it reflects the structural differences in how each fund approaches long-term bonds.

Inside the Portfolios: Why the Divergence Matters

SPLB targets exclusively long-term bonds with maturities of 10 years or beyond, holding 2,953 securities with an average duration of 16.8 years. Its largest holdings reflect this focus: Meta Platforms (NASDAQ: META) Sr Unsecured 11/65 5.75% (0.39%), Anheuser Busch InBev (NYSE: BUD) Company Guaranteed 02/46 4.9% (0.38%), and CVS Health (NYSE: CVS) Sr Unsecured 03/48 5.05% (0.33%).

LQD casts a wider net, holding 3,002 investment-grade corporate bonds across the entire maturity spectrum. Roughly 22.3% of its holdings mature in three to five years, while 16.6% sit in the five-to-seven-year range. Its top three positions—BlackRock (NYSE: BLK) Cash Fund Treasury SL Agency 0.90%, Anheuser Busch InBev 0.23%, and CVS Health 0.20%—reflect this maturity diversity.

The consequence: longer-duration bonds are far more sensitive to interest rate swings. When rates spike, SPLB’s extended duration works against it, which explains both its higher yield and its sharper drawdowns. LQD’s maturity mix provides a natural cushion, explaining its relative stability during periods of rising rates.

The Investment Verdict

Choosing between these funds depends on your priorities:

Choose SPLB if: You prioritize current income, have a high risk tolerance, plan to hold through multiple interest rate cycles, and want minimal fee drag eating into returns.

Choose LQD if: You value portfolio stability, expect rising rates, prefer proven long-term performance, or want a larger, more liquid fund with deeper institutional backing.

Both funds hold investment-grade corporate bonds, making them solid core positions for diversified income strategies. But SPLB’s focus on long-term bond segments tilts toward return generation through yield, while LQD’s broad maturity approach emphasizes capital preservation. For conservative investors seeking long-term bond exposure without dramatic drawdowns, LQD’s track record speaks louder than SPLB’s fee advantage.

Quick Reference: Key Definitions

Expense Ratio: Annual operating costs expressed as a percentage of fund assets.

Dividend Yield: Annual income distribution relative to fund share price.

Investment-Grade: Bonds rated low-default-risk by major credit agencies.

Corporate Bond: Debt issued by corporations to raise capital, paying periodic interest.

Maturity: The date when principal repayment and interest payments cease.

Drawdown: Peak-to-trough decline during a specific period.

Beta: Volatility measure relative to the S&P 500.

Duration: Bond sensitivity to interest rate changes; longer duration = higher sensitivity.

Long-Term Bonds: Debt securities with maturities exceeding 10 years, offering higher yields but greater rate risk.

AUM: Total assets managed by the fund.