Investing in Vanguard’s High Dividend Yield ETF (VYM): A Wise Move?

Is VYM a good investment in 2022

Vanguard’s High Dividend Yield ETF (VYM) is a smart beta ETF that launched on November 10, 2006, and provides wide exposure to the Style Box – Large Cap Value area of the market. This article examines the strength of the ETF along with other associated factors. Before going into the details of VYM, let us delve into the concept of Smart Beta ETFs.

Smart Beta ETFs Explained

ETFs based on market capitalization weighted indices, which aim to reflect the whole market or an individual market sector, have been flooding the market for some time.

An economical, easy and transparent strategy to mirror the returns of a market is to invest in market cap indexes.

For an individual interested in beating the market via company selection, smart beta funds are the way to go; a fund class that is recognized for pursuing non-cap weighted methods.

Companies in this index are chosen based on their risk-return potential; non-cap weighted techniques focus on stocks based on specific fundamental characteristics or a combination of the same.

From equal-weighting, one of the simplest methods, to more advanced strategies such as fundamental and volatility/momentum based weighting, the smart beta market offers a wide range of options to investors. However, not all of these approaches have proven to be successful.

Fund Sponsor & Index

The Vanguard-managed fund has accumulated about $41.91 billion, making it one of the Style Box – Large Cap Value’s largest ETFs. VYM aims to replicate the FTSE High Dividend Yield Index’s performance before fees and expenses.

Companies that pay out dividends at a rate that is greater than the industry average are included in the FTSE High Dividend Yield Index.

Sector Exposure and Top Holdings

Despite the various benefits of ETFs, such as diversified exposure that reduces the risk of investing in a single company, it is critical to thoroughly investigate the holdings of an ETF before making a decision to invest. Almost all ETFs are openly traded and reveal their holdings on a regular basis, making them highly transparent products.

Financials make up the bulk of this ETF’s holdings, accounting for around 21.70 percent of its total value. This sector is followed by Healthcare & Consumer Staples.  To begin with, JPMorgan Chase & Co. (JPM) has 3.72 percent of total assets, trailed by JNJ (JNJ) and Home Depot Inc. (HD).

Cost & Other Expenses

Expense ratios are a significant consideration for investors in ETFs; in the long run, cheaper funds may potentially beat their more costly counterparts if all other factors stay constant. It is one of the most cost-effective ETFs available, with annual operating expenditures of only 0.06 percent.

During the last 12 months, the dividend yield for VYM has been 2.85 percent.

Performance and Risk

VYM has lost around -3.42 percent so far this year, and has gained about 14.03 percent over the last year (as of 03/08/2022). The fund’s price ranged from $98.70 to $115.01 during the last 52 weeks.

With a beta of 0.88 and a standard deviation of 22.12 percent over the last three years, the ETF is a medium-risk option in the category. It efficiently diversifies company-specific risk with its approximately 413 holdings.

What Other Alternatives Are Out There?

The Vanguard High Dividend Yield ETF is a fantastic choice for those who are looking to outperform the Style Box – Large Cap Value area of the market in terms of returns. Other ETFs are available for investors to choose from.

The Russell 1000 Value Index is tracked by the IShares Russell 1000 Value ETF (IWD), while the CRSP U.S. Large Cap Value Index is tracked by the Vanguard Value ETF (VTV). There are $55.36 billion in assets in the IShares Russell 1000 Value ETF, compared to $91.71 billion in the Vanguard Value ETF. IWD charges a 0.19 percent expense ratio, whereas VTV charges a 0.04 percent.

Traditional market cap weighted ETFs that try to replicate the results of the Style Box – Large Cap Value are an excellent choice for those seeking lower-cost, lower-risk investments.

We hope you found this article on Vanguard’s High Dividend Yield ETF (VYM) useful. If you want to track the performance of this ETF or any other stock/crypto of your choice, create a watchlist by setting up a free account on Rich Picks Daily here. And don’t forget to follow our Youtube channel to view useful investing videos. Thanks for reading.

Disclaimer:

Rich Picks Daily company profiles and other investor relations materials, publications or presentations, including web content, are based on data obtained from sources we believe to be reliable but are not guaranteed as to accuracy and are not purported to be complete. As such, the information should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed in Rich Picks Daily reports company profiles or other investor relations materials and presentations are subject to change. Rich Picks Daily & RICH TV LIVE and its affiliates may buy and sell shares of securities or options of the issuers mentioned on this website at any time.

Investing is inherently risky. Rich Picks Daily is not responsible for any gains or losses that result from the opinions expressed on this website, in its research reports, company profiles or in other investor relations materials or presentations that it publishes electronically or in print.

We strongly encourage all investors to conduct their own research before making any investment decision. For more information on stock market investing, visit the Securities and Exchange Commission (“SEC”) at www.sec.gov/Canadian CSA https://www.securities-administrators

Latest Articles


By Fool Co, June 24, 2022
RRSP Investors: 3...
By Global News Wire,
Yotta Acquisition...

Enter your email address to
subscribe to our newsletter

Top 10 Picks Of The Month

Market Movers