5 Best Corporate Bond ETFs 2025 – Seeking Higher Returns

Here’s the reality that Wall Street doesn’t want you to ignore: Bond ETF inflows hit a record $25 billion per month in 2024, up from $17.1 billion in 2023, and corporate bond ETFs are leading the charge. With the Fed cutting rates by 100 basis points since September 2024 and corporate fundamentals remaining strong with companies sitting on plenty of liquid assets, we’re in a sweet spot that rarely comes around.

But here’s the challenge: with hundreds of corporate bond ETFs now available, how do you choose the right ones for your portfolio? We’ll dive deep into the five best corporate bond ETFs for 2025, examining everything from rock-bottom expense ratios to credit quality – because in a market this good, you can’t afford to pick the wrong fund.

Finding the Best Corporate Bond ETFs: My Story

I didn’t start investing in corporate bond ETFs because I was some genius who saw the writing on the wall. I started because my work has strict conflict of interest policies that prevent me from investing in individual stocks, and while I can invest in stock index funds, they don’t provide the stable income stream I was looking for unlike fixed income investments where you can expect regular interest revenue.

That constraint led me down a rabbit hole of research that completely changed how I think about fixed income investing. After testing five different corporate bond ETFs over the past three years and making some pretty embarrassing mistakes along the way, I’ve finally figured out which ones are actually worth your money.

The Vanguard Intermediate-Term Corporate Bond ETF (VCIT): My Top Pick

What immediately caught my attention about VCIT was Vanguard’s decision to lower the expense ratio from 0.04% to just 0.03% on February 1st, 2025. For context, many actively managed bond funds charge 10-30 times more in fees, which means more of your returns stay in your pocket rather than going to fund management.

Key VCIT Stats:

• Expense ratio: 0.03% (reduced from 0.04% in Feb 2025)
• Current yield: ~4.1-4.5%
• Holdings: ~2,000 investment-grade corporate bonds
• Average duration: 6.8 years
• Maturity focus: 5-10 years
• Assets: ~$47-53 billion

The 6.8-year average duration taught me an important lesson about interest rate sensitivity. When the Federal Reserve raised rates aggressively in 2022, VCIT declined approximately 15%, but this volatility was significantly less severe than what long-term bond funds experienced during the same period.

VCIT’s performance across different market cycles has been particularly impressive for income-focused investors. The fund consistently generates quarterly dividend payments while maintaining reasonable price stability, making it an excellent core holding for portfolios that prioritize steady cash flow over capital appreciation.

Learn more: VCIT on Vanguard’s website

iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD): The Liquid Powerhouse

What immediately caught my attention about LQD was its unmatched liquidity in the corporate bond space. With over $30 billion in assets under management and more than 25 million shares traded daily,, this isn’t just another bond ETF – it’s the go-to choice for serious fixed income investors who need the ability to move in and out of positions without worrying about spreads or market impact.

Key LQD Stats:

• Expense ratio: 0.14%
• Current yield: ~4.8% yield to maturity
• Holdings: 600+ bond issues
• Average duration: ~8-10 years
• Maturity focus: Broad corporate bond market
• Assets: $30+ billion

The longer duration compared to VCIT means LQD is more sensitive to interest rate changes, but that’s also why it offers a higher yield. When rates started climbing aggressively, LQD took a beating, but the income cushion from that higher yield helped offset some of the price volatility. The key lesson I learned is that with LQD, you’re getting paid more to take on that extra duration risk.

What really sets LQD apart is its trading versatility. You can trade options on LQD, sell covered calls for extra income, or buy puts to hedge against bond declines. This makes it incredibly useful for more sophisticated bond strategies beyond just buy-and-hold. The 0.01% bid-ask spread means you’re not getting crushed by trading costs, which is crucial when you’re moving larger positions.

Learn more: LQD on iShares’ website

Schwab 5-10 Year Corporate Bond ETF (SCHI): The Hidden Gem

SCHI flies completely under the radar, and I honestly think that’s part of its appeal. While everyone’s fighting over Vanguard and iShares funds, Schwab quietly built a really solid intermediate-term corporate bond ETF that directly competes with VCIT.

Key SCHI Stats:

• Expense ratio: 0.04%
• Current yield: ~4.3%
• Holdings: Investment-grade corporate bonds
• Average duration: 5-10 years
• Focus: Intermediate range of the corporate bond yield curve
• Advantage: Less crowded, sometimes better entry points

Here’s what I love about SCHI – because it doesn’t get the same attention as the big names, sometimes you can find better entry points. The performance has been neck-and-neck with VCIT, but with the same ultra-low 0.04% expense ratio that makes Schwab’s ETF lineup so competitive.

I started with a small position in SCHI just to test it out, and it’s become one of my favorite “set it and forget it” holdings. It provides income from the intermediate range of the corporate bond yield curve, hitting that sweet spot between duration risk and yield that makes intermediate corporate bonds so appealing. Sometimes the best investments are the ones nobody’s talking about on social media.

Learn more: SCHI on Schwab’s website

Fidelity Corporate Bond ETF (FCOR): The Active Management Alternative

FCOR stands out from the crowd because it’s one of the few actively managed corporate bond ETFs from a major fund family. While most corporate bond ETFs simply track an index, FCOR is actively managed and invests in investment-grade corporate bonds using the same strategy that underlies Fidelity’s Corporate Bond mutual fund FCOR Fidelity Corporate Bond ETF.

Key FCOR Stats:

• Expense ratio: 0.36%
• Current yield: ~4.5-4.6%
• Holdings: Investment-grade corporate bonds
• Assets: ~$238 million
• Management style: Actively managed
• Advantage: Professional bond selection and timing

Here’s what I find interesting about FCOR – you’re paying a higher fee (0.36% vs. the 0.03-0.04% of index funds), but you’re getting active management from Fidelity’s bond team. The fund analyzes credit quality, security-specific features, current and potential future valuation, and trading opportunities to select investments. This means they can potentially avoid troubled companies or find better opportunities than a passive index approach.

The trade-off is obvious: higher fees for potential outperformance. FCOR is reasonably priced for active management, though cheaper options exist. I’ve used FCOR as a smaller allocation alongside my core index funds when I want some active management without the complexity of picking individual bonds myself. It’s essentially letting Fidelity’s professionals do the credit analysis and timing decisions for me.

Learn more: FCOR on Fidelity’s website

iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD): The Expensive Option That Might Be Worth It

LQD was actually the first corporate bond ETF I ever bought, way back in 2021. At the time, I didn’t really understand expense ratios – I just saw that it was popular and had good liquidity.

Key LQD Stats:

• Expense ratio: 0.14% (higher than competitors)
• Current yield: ~4.8% yield to maturity
• Holdings: 600+ bond issues
• Focus: Liquid investment-grade corporate bonds screened for high trading volume
• Assets: $30+ billion
• Liquidity: Exceptional – 25+ million shares daily volume, 0.01% bid-ask spread
• Advantage: Superior liquidity and options trading available
• Disadvantage: Higher fees than alternatives

LQD tracks the Markit iBoxx USD Liquid Investment Grade Index, with a big focus on liquidity – the underlying bonds are screened for high trading volume and popularity. This means when corporate credit markets get choppy, having that extra liquidity can be the difference between getting out at a reasonable price and watching your fund gap down.

I still hold some LQD, but it’s a much smaller position than my VCIT holding. If you’re doing tactical trading, you can even sell covered calls on your LQD shares or buy puts to hedge against bond declines. For investors who need to move quickly or want sophisticated trading strategies, the higher fee might be worth it for the unmatched liquidity and versatility.

Learn more: LQD on iShares’ website

The Bottom Line: Start Simple, Then Get Fancy

If you’re just starting out with corporate bond ETFs, buy VCIT and call it a day. The combination of low fees, solid yield, and massive liquidity makes it the obvious choice for most people.

Once you get comfortable and want to add some complexity, AGG provides great diversification, and SCHZ offers a solid alternative with slightly different characteristics. LQD is really only necessary if you’re doing more active trading.

The biggest mistake I made early on was overthinking this stuff. Corporate bond ETFs aren’t rocket science – find low-cost funds that track reasonable benchmarks, and don’t try to time the market. Your future self will thank you for keeping it simple.

Fund	Cost	Yield	Maturity	Pros	Cons
Vanguard Intermediate-Term Corporate Bond ETF (VCIT)	0.03%	~4.1-4.5%	6.8 years / 5-10 years	Lowest fees, huge scale, proven track record	Less liquid than LQD, limited trading features
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)	0.14%	~4.8%	~8-10 years / Broad market	Superior liquidity, options trading, most popular	Higher fees, longer duration risk
Schwab 5-10 Year Corporate Bond ETF (SCHI)	0.04%	~4.3%	5-10 years	Ultra-low fees, less crowded, Schwab ecosystem	Smaller scale, less attention/research coverage
Fidelity Corporate Bond ETF (FCOR)	0.36%	~4.5-4.6%	Variable	Active management, professional bond selection	Much higher fees, smaller scale, inconsistent execution
iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB)	0.04%	~4.5-4.6%	6.0 years / 5-10 years	Same low fees as VCIT, BlackRock backing	Less scale than VCIT, higher credit risk (51% BBB bonds)

Just remember, bond prices move opposite to interest rates, so don’t panic when the Fed starts moving rates around. That’s just part of the game.

Conclusion – Your Next Steps

Here’s the reality: if you’re extremely risk-averse and lose sleep over any credit risk, government bond ETFs (especially short-term) are probably your best bet. But if you can handle a little more risk in exchange for higher yields, corporate bond ETFs offer compelling income opportunities that government bonds simply can’t match. Keep in mind that investment-grade bonds are much less likely to default because the selection is based on the quality of companies and their financial discipline – we’re talking about financially sound corporations, not risky startups.

Once you’ve decided you’re comfortable with this level of corporate credit risk, use our comparison table to find your fit. Start with one fund – I’d suggest VCIT for most people due to those rock-bottom fees – and build your allocation as you get comfortable with how these high-quality bond funds behave in your portfolio.

This content is for educational purposes only and should not be considered investment advice. Past performance does not guarantee future results, and all investments carry risk of loss.