IVV vs VYM: Comparing Two Popular ETFs

IVV and VYM are two popular exchange-traded funds (ETFs) that investors consider when looking for long-term investment options.

IVV vs VYM: Both ETFs offer exposure to the US stock market, but they have different investment objectives and strategies.

Understanding the differences between IVV vs VYM can help you make an informed investment decision that aligns with your financial goals.

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IVV is an ETF that tracks the performance of the S&P 500 index, which includes 500 large-cap US stocks. It aims to provide investors with broad exposure to the US stock market and is suitable for those who want to invest in well-established companies with a proven track record. On the other hand, VYM is an ETF that tracks the performance of the FTSE High Dividend Yield Index, which includes US stocks with above-average dividend yields. VYM is suitable for investors who are looking for dividend income and are willing to take on slightly more risk than IVV.

When deciding between IVV and VYM, it’s important to consider your investment objectives, risk tolerance, and portfolio diversification. In this article, we will analyze the performance, investment considerations, top holdings, and sector analysis of IVV and VYM to help you make an informed investment decision.

Key Takeaways IVV vs VYM

  • IVV and VYM are two popular ETFs that offer exposure to the US stock market, but they have different investment objectives and strategies.
  • IVV tracks the S&P 500 index and is suitable for investors who want broad exposure to the US stock market, while VYM tracks the FTSE High Dividend Yield Index and is suitable for investors who are looking for dividend income.
  • When deciding between IVV and VYM, it’s important to consider your investment objectives, risk tolerance, and portfolio diversification.

Understanding IVV vs VYM

If you are considering investing in ETFs, you may have come across iShares Core S&P 500 ETF (IVV) and Vanguard High Dividend Yield ETF (VYM). Both IVV and VYM are ETFs that can provide you with exposure to the U.S. stock market. In this section, we will help you understand the key differences between IVV and VYM.

Fund Objectives and Strategies

IVV aims to track the performance of the S&P 500 index, which is a benchmark of the largest 500 companies in the U.S. stock market. IVV invests in all the stocks in the S&P 500 index in the same proportion as the index. This means that if a stock makes up 2% of the S&P 500 index, IVV will invest 2% of its assets in that stock.

On the other hand, VYM aims to track the performance of the FTSE High Dividend Yield Index, which is a benchmark of U.S. stocks that pay above-average dividends. VYM invests in stocks that have a higher dividend yield than the average dividend yield of the U.S. stock market. This means that VYM may invest in stocks that are not in the S&P 500 index.

Key Differences in Holdings and Sector Exposure

IVV and VYM have different holdings and sector exposure. IVV invests in all the stocks in the S&P 500 index, which includes large-cap U.S. companies across different sectors such as technology, healthcare, and financials. On the other hand, VYM invests in U.S. stocks that pay above-average dividends, which includes stocks from sectors such as consumer staples, utilities, and real estate.

As of December 9, 2023, the top five holdings of IVV are Apple Inc., Microsoft Corporation, Amazon.com Inc., Facebook Inc., and Alphabet Inc. As of the same date, the top five holdings of VYM are JPMorgan Chase & Co., Johnson & Johnson, Procter & Gamble Co., Verizon Communications Inc., and AT&T Inc.

In terms of sector exposure, IVV has a higher exposure to the technology sector, while VYM has a higher exposure to the financials sector. As of December 9, 2023, the technology sector makes up around 27% of IVV’s holdings, while the financials sector makes up around 23% of VYM’s holdings.

In summary, IVV and VYM are two different ETFs with different fund objectives and strategies. IVV tracks the S&P 500 index and invests in all the stocks in the index, while VYM tracks the FTSE High Dividend Yield Index and invests in U.S. stocks that pay above-average dividends. They also have different holdings and sector exposure.

Performance Analysis IVV vs VYM

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Historical Returns and Market Capitalization

When comparing the performance of IVV and VYM, it is important to consider their historical returns and market capitalization. IVV is an ETF that tracks the performance of the S&P 500 index, which is composed of 500 large-cap US stocks. On the other hand, VYM is an ETF that tracks the performance of the FTSE High Dividend Yield Index, which is composed of US stocks with a high dividend yield.

Historically, IVV has outperformed VYM in terms of total returns. According to etf.com, the total return of IVV over the past 5 years was 125.62%, while VYM had a total return of 99.64%. Additionally, IVV has a larger market capitalization than VYM, which may suggest that it is a more popular and widely-held investment option.

Dividend Yield Comparisons

One of the main differences between IVV and VYM is their dividend yield. VYM has a higher dividend yield than IVV, which may make it a more attractive option for investors looking for income. According to mrmarvinallen.com, the current dividend yield of VYM is 2.83%, while the dividend yield of IVV is 1.32%.

However, it is important to note that a higher dividend yield does not necessarily mean a better investment. High dividend yields may indicate that a company is struggling and unable to reinvest profits into growth opportunities. Furthermore, dividend payments are not guaranteed and may be cut or suspended in the future.

Risk Metrics: Volatility and Standard Deviation

Another important factor to consider when comparing IVV and VYM is their risk metrics, specifically volatility and standard deviation. Volatility measures the degree of variation of a stock’s price over time, while standard deviation measures the degree of variation of a stock’s returns from its average.

IVV has historically been less volatile than VYM, which may make it a more stable investment option. According to composer.trade, the standard deviation of IVV over the past 5 years was 16.37%, while the standard deviation of VYM was 20.46%. However, it is important to note that past performance is not indicative of future results and that both IVV and VYM carry risks that investors should carefully consider before investing.

In summary, when comparing IVV and VYM, it is important to consider their historical returns, dividend yield, and risk metrics. While IVV has historically outperformed VYM in terms of total returns and has been less volatile, VYM has a higher dividend yield and may be a more attractive option for investors looking for income. Ultimately, the best investment option will depend on an individual investor’s goals, risk tolerance, and investment strategy.

Investment Considerations IVV vs VYM

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When deciding between IVV and VYM, there are a few key investment considerations to keep in mind. These include expense ratios and cost efficiency, portfolio diversification and quality screen, and assessing dividend growth and sustainability.

Expense Ratios and Cost Efficiency

One of the most important factors to consider when choosing between IVV and VYM is the expense ratio. IVV has a lower expense ratio of 0.03% compared to VYM’s 0.06%. This means that IVV is more cost-efficient and may be a better option for investors who prioritize low fees.

Portfolio Diversification and Quality Screen

Another important factor to consider is portfolio diversification and quality screen. IVV tracks the S&P 500 index, which includes 500 large-cap U.S. stocks. This provides broad exposure to the U.S. stock market and diversifies risk across multiple sectors. VYM, on the other hand, tracks the FTSE High Dividend Yield Index, which includes U.S. stocks with above-average dividend yields. This may result in a more concentrated portfolio and higher exposure to certain sectors.

When it comes to quality screen, both IVV and VYM use different methodologies. IVV screens for profitability, liquidity, and market capitalization, while VYM screens for dividend yield and dividend growth. Depending on your investment goals, one approach may be more suitable than the other.

Assessing Dividend Growth and Sustainability

If you’re investing in a dividend-focused ETF, it’s important to assess the dividend growth and sustainability of the underlying stocks. VYM has a higher dividend yield than IVV, but this doesn’t necessarily mean it’s a better investment. You should also look at the payout ratios and profitability of the companies in the ETF to determine if they can sustain their dividend payments over the long term.

In conclusion, when deciding between IVV and VYM, it’s important to consider your investment goals and priorities. If you prioritize low fees and broad exposure to the U.S. stock market, IVV may be a better option. If you prioritize high dividend yield and growth, VYM may be more suitable.

Top Holdings and Sector Analysis

Leading Companies and Their Impact

When comparing IVV vs VYM, it’s important to take a closer look at their top holdings. IVV’s top holdings include technology giants Apple and Microsoft, while VYM’s top holdings include Johnson & Johnson and JPMorgan Chase. These companies have a significant impact on the overall performance of each ETF.

Apple has been a top performer in the technology sector for years, with its innovative products and strong financials. Microsoft is another technology giant that has consistently delivered strong returns for investors. Johnson & Johnson, on the other hand, is a consumer staples company that has a strong presence in the healthcare industry. JPMorgan Chase is a financial institution that has a large impact on the financial sector.

Sector Allocation and Performance

IVV and VYM have different sector allocations that can affect their overall performance. IVV has a higher allocation to the technology sector, which has been a top performer in recent years. VYM, on the other hand, has a higher allocation to consumer staples and industrials.

The technology sector has been a top performer in recent years, with companies like Apple and Microsoft leading the way. The consumer staples sector, on the other hand, is known for its stability and consistent returns. Industrials can be a cyclical sector, with performance tied to economic growth.

Overall, when comparing IVV vs VYM, it’s important to consider their top holdings and sector allocations. Both ETFs have their own strengths and weaknesses, and it’s up to you to decide which one aligns with your investment goals.

Making the Investment Decision

When it comes to making an investment decision between IVV and VYM, there are a few important factors to consider. In this section, we will explore some of the key considerations to help you make the best decision for your investment portfolio.

Comparing Past Performance to Future Potential

One of the first things many investors consider when making an investment decision is past performance. While past performance is not a guarantee of future results, it can be a helpful indicator of how an investment may perform in the future.

When comparing IVV and VYM, it’s important to look at their historical performance. Over the past five years, IVV has had a slightly higher return than VYM. However, VYM has a higher dividend yield than IVV, which may be attractive to investors seeking income.

It’s also important to consider the potential for future growth and performance. While past performance can be helpful, it’s important to look at the current market conditions and economic outlook to determine which investment may have the most potential for growth in the future.

Strategic Buying, Holding, or Selling

Another important factor to consider when making an investment decision between IVV and VYM is your investment strategy. Are you looking to buy and hold for the long term, or are you looking to make a short-term investment?

If you’re looking to buy and hold, both IVV and VYM may be good options. IVV tracks the S&P 500, which is a broad index of large-cap stocks that has historically performed well over the long term. VYM, on the other hand, focuses on high-dividend-yielding stocks, which can provide a steady stream of income over time.

If you’re looking to make a short-term investment, it’s important to consider the current market conditions and economic outlook. For example, if you believe that the economy is likely to continue to grow in the short term, IVV may be a good option as it tracks the S&P 500, which tends to perform well during periods of economic growth.

Ultimately, the decision to buy, hold, or sell IVV or VYM will depend on your individual investment goals and risk tolerance. By considering factors such as past performance and your investment strategy, you can make a more informed decision about which investment is right for you.

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