Credit Quality Definition

Credit Quality Definition

Learn the definition of credit quality and other ETF terminology from the glossary.

Reviewed by: Staff
Edited by: Staff

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.

Related Terms

Corporate Bond ETF, High-Yield Bond ETF, Treasury Bond ETF

ETF Glossary is’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.