IWM vs. VYM: What’s The Difference?

The iShares Russell 2000 ETF (IWM) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both among the Top 100 ETFs. IWM is a iShares Small Blend fund and VYM is a Vanguard Large Value fund. So, what’s the difference between IWM and VYM? And which fund is better?

The expense ratio of IWM is 0.13 percentage points higher than VYM’s (0.19% vs. 0.06%). IWM also has a higher exposure to the healthcare sector and a higher standard deviation. Overall, IWM has provided higher returns than VYM over the past ten years.

In this article, we’ll compare IWM vs. VYM. We’ll look at performance and industry exposure, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss IWM’s and VYM’s holdings, annual returns, and portfolio growth and examine how these affect their overall returns.

Summary

IWM VYM
Name iShares Russell 2000 ETF Vanguard High Dividend Yield Index Fund ETF Shares
Category Small Blend Large Value
Issuer iShares Vanguard
AUM 66.48B 48.5B
Avg. Return 13.52% 12.20%
Div. Yield 0.86% 2.79%
Expense Ratio 0.19% 0.06%

The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.

IWM’s dividend yield is 1.93% lower than that of VYM (0.86% vs. 2.79%). Also, IWM yielded on average 1.32% more per year over the past decade (13.52% vs. 12.20%). The expense ratio of IWM is 0.13 percentage points higher than VYM’s (0.19% vs. 0.06%).

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Fund Composition

Industry Exposure

IWM vs. VYM - Industry Exposure

IWM VYM
Technology 14.21% 9.77%
Industrials 14.78% 10.14%
Energy 3.74% 7.12%
Communication Services 3.79% 5.91%
Utilities 2.44% 7.27%
Healthcare 20.3% 13.61%
Consumer Defensive 3.65% 14.13%
Real Estate 8.59% 0.02%
Financial Services 13.76% 22.05%
Consumer Cyclical 10.99% 5.57%
Basic Materials 3.74% 4.41%

The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.

IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has the most exposure to the Financial Services sector at 22.05%. This is followed by Consumer Defensive and Healthcare at 14.13% and 13.61% respectively. Basic Materials (4.41%), Consumer Cyclical (5.57%), and Communication Services (5.91%) only make up 15.89% of the fund’s total assets.

VYM’s mid-section with moderate exposure is comprised of Energy, Utilities, Technology, Industrials, and Healthcare stocks at 7.12%, 7.27%, 9.77%, 10.14%, and 13.61%.

IWM is 6.69% more exposed to the Healthcare sector than VYM (20.3% vs 13.61%). IWM’s exposure to Industrials and Technology stocks is 4.64% higher and 4.44% higher respectively (14.78% vs. 10.14% and 14.21% vs. 9.77%). In total, Consumer Defensive, Basic Materials, and Energy also make up 14.53% less of the fund’s holdings compared to VYM (11.13% vs. 25.66%).

Holdings

IWM - Holdings

IWM Holdings Weight
AMC Entertainment Holdings Inc Class A 0.52%
Intellia Therapeutics Inc 0.33%
Crocs Inc 0.3%
BlackRock Cash Funds Treasury SL Agency 0.29%
Tenet Healthcare Corp 0.26%
Lattice Semiconductor Corp 0.26%
Tetra Tech Inc 0.25%
II-VI Inc 0.25%
EastGroup Properties Inc 0.24%
Arrowhead Pharmaceuticals Inc 0.24%

IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.

Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.

VYM - Holdings

VYM Holdings Weight
JPMorgan Chase & Co 3.53%
Johnson & Johnson 3.28%
The Home Depot Inc 2.59%
Procter & Gamble Co 2.48%
Bank of America Corp 2.35%
Exxon Mobil Corp 2.02%
Comcast Corp Class A 1.96%
Verizon Communications Inc 1.75%
Intel Corp 1.71%
Cisco Systems Inc 1.69%

VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.

Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.

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Risk Analysis

IWM VYM
Mean Return 1.12 1.04
R-squared 77.73 88.88
Std. Deviation 18.87 12.69
Alpha -5.12 -0.7
Beta 1.23 0.88
Sharpe Ratio 0.68 0.93
Treynor Ratio 9.56 13.24

The iShares Russell 2000 ETF (IWM) has a Treynor Ratio of 9.56 with a Standard Deviation of 18.87 and a R-squared of 77.73. Its Sharpe Ratio is 0.68 while IWM’s Beta is 1.23. Furthermore, the fund has a Alpha of -5.12 and a Mean Return of 1.12.

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a R-squared of 88.88 with a Standard Deviation of 12.69 and a Treynor Ratio of 13.24. Its Mean Return is 1.04 while VYM’s Beta is 0.88. Furthermore, the fund has a Sharpe Ratio of 0.93 and a Alpha of -0.7.

IWM’s Mean Return is 0.08 points higher than that of VYM and its R-squared is 11.15 points lower. With a Standard Deviation of 18.87, IWM is slightly more volatile than VYM. The Alpha and Beta of IWM are 4.42 points lower and 0.35 points higher than VYM’s Alpha and Beta.

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Performance

Annual Returns

IWM vs. VYM - Annual Returns

Year IWM VYM
2020 19.89% 1.14%
2019 25.42% 24.2%
2018 -11.02% -5.87%
2017 14.66% 16.42%
2016 21.36% 16.87%
2015 -4.33% 0.33%
2014 4.94% 13.47%
2013 38.85% 30.26%
2012 16.39% 12.68%
2011 -4.19% 10.5%
2010 26.76% 14.17%

IWM had its best year in 2013 with an annual return of 38.85%. IWM’s worst year over the past decade yielded -11.02% and occurred in 2018. In most years the iShares Russell 2000 ETF provided moderate returns such as in 2017, 2012, and 2020 where annual returns amounted to 14.66%, 16.39%, and 19.89% respectively.

The year 2013 was the strongest year for VYM, returning 30.26% on an annual basis. The poorest year for VYM in the last ten years was 2018, with a yield of -5.87%. Most years the Vanguard High Dividend Yield Index Fund ETF Shares has given investors modest returns, such as in 2012, 2014, and 2010, when gains were 12.68%, 13.47%, and 14.17% respectively.

Portfolio Growth

IWM vs. VYM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
IWM $10,000 $36,686 13.52%
VYM $10,000 $33,914 12.20%

A $10,000 investment in IWM would have resulted in a final balance of $36,686. This is a profit of $26,686 over 11 years and amounts to a compound annual growth rate (CAGR) of 13.52%.

With a $10,000 investment in VYM, the end total would have been $33,914. This equates to a $23,914 profit over 11 years and a compound annual growth rate (CAGR) of 12.20%.

IWM’s CAGR is 1.32 percentage points higher than that of VYM and as a result, would have yielded $2,772 more on a $10,000 investment. Thus, IWM outperformed VYM by 1.32% annually.


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