Credit Quality Definition
Learn the definition of credit quality and other ETF terminology from the etf.com glossary.
Learn more about Credit Quality
Credit Quality in the context of ETFs refers to the evaluation and measure of the creditworthiness of fixed-income securities within a fund's portfolio. Credit rating agencies assign grades reflecting the likelihood of a borrower defaulting on debt obligations. ETF investors analyze credit quality to assess the risk associated with a fund's bond holdings. Higher-rated securities generally indicate lower credit risk but may offer lower returns. Understanding credit quality is paramount for investors seeking to construct a fixed-income portfolio aligned with their risk tolerance and income objectives, providing a foundation for informed decision-making in the dynamic landscape of bond markets.
