VEA vs. VYM: What’s The Difference?

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both among the Top 100 ETFs. VEA is a Vanguard Foreign Large Blend fund and VYM is a Vanguard Large Value fund. So, what’s the difference between VEA and VYM? And which fund is better?

The expense ratio of VEA is 0.01 percentage points lower than VYM’s (0.05% vs. 0.06%). VEA also has a lower exposure to the financial services sector and a higher standard deviation. Overall, VEA has provided lower returns than VYM over the past ten years.

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

Summary

VEA VYM
Name Vanguard FTSE Developed Markets Index Fund ETF Shares Vanguard High Dividend Yield Index Fund ETF Shares
Category Foreign Large Blend Large Value
Issuer Vanguard Vanguard
AUM 157.48B 48.5B
Avg. Return 7.05% 12.20%
Div. Yield 2.49% 2.79%
Expense Ratio 0.05% 0.06%

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 157.48B total assets under management and has yielded an average annual return of 7.05% over the past 10 years. The fund has a dividend yield of 2.49% with an expense ratio of 0.05%.

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%.

VEA’s dividend yield is 0.30% lower than that of VYM (2.49% vs. 2.79%). Also, VEA yielded on average 5.15% less per year over the past decade (7.05% vs. 12.20%). The expense ratio of VEA is 0.01 percentage points lower than VYM’s (0.05% vs. 0.06%).

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Fund Composition

Industry Exposure

VEA vs. VYM - Industry Exposure

VEA VYM
Technology 11.67% 9.77%
Industrials 15.47% 10.14%
Energy 4.17% 7.12%
Communication Services 5.41% 5.91%
Utilities 3.1% 7.27%
Healthcare 10.6% 13.61%
Consumer Defensive 8.61% 14.13%
Real Estate 4.04% 0.02%
Financial Services 17.39% 22.05%
Consumer Cyclical 11.31% 5.57%
Basic Materials 8.24% 4.41%

The Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) has the most exposure to the Financial Services sector at 17.39%. This is followed by Industrials and Technology at 15.47% and 11.67% respectively. Real Estate (4.04%), Energy (4.17%), and Communication Services (5.41%) only make up 13.62% of the fund’s total assets.

VEA’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Consumer Cyclical, and Technology stocks at 8.24%, 8.61%, 10.6%, 11.31%, and 11.67%.

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%.

VEA is 4.66% less exposed to the Financial Services sector than VYM (17.39% vs 22.05%). VEA’s exposure to Industrials and Technology stocks is 5.33% higher and 1.90% higher respectively (15.47% vs. 10.14% and 11.67% vs. 9.77%). In total, Real Estate, Energy, and Communication Services also make up 0.57% more of the fund’s holdings compared to VYM (13.62% vs. 13.05%).

Holdings

VEA - Holdings

VEA Holdings Weight
Nestle SA 1.5%
Samsung Electronics Co Ltd 1.4%
ASML Holding NV 1.16%
Roche Holding AG 1.1%
Toyota Motor Corp 0.92%
LVMH Moet Hennessy Louis Vuitton SE 0.84%
Novartis AG 0.82%
Shopify Inc A 0.7%
AstraZeneca PLC 0.67%
SAP SE 0.66%

VEA’s Top Holdings are Nestle SA, Samsung Electronics Co Ltd, ASML Holding NV, Roche Holding AG, and Toyota Motor Corp at 1.5%, 1.4%, 1.16%, 1.1%, and 0.92%.

LVMH Moet Hennessy Louis Vuitton SE (0.84%), Novartis AG (0.82%), and Shopify Inc A (0.7%) have a slightly smaller but still significant weight. AstraZeneca PLC and SAP SE are also represented in the VEA’s holdings at 0.67% and 0.66%.

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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Performance

Annual Returns

VEA vs. VYM - Annual Returns

Year VEA VYM
2020 10.29% 1.14%
2019 22.08% 24.2%
2018 -14.47% -5.87%
2017 26.44% 16.42%
2016 2.51% 16.87%
2015 -0.21% 0.33%
2014 -5.71% 13.47%
2013 22.12% 30.26%
2012 18.6% 12.68%
2011 -12.57% 10.5%
2010 8.47% 14.17%

VEA had its best year in 2017 with an annual return of 26.44%. VEA’s worst year over the past decade yielded -14.47% and occurred in 2018. In most years the Vanguard FTSE Developed Markets Index Fund ETF Shares provided moderate returns such as in 2016, 2010, and 2020 where annual returns amounted to 2.51%, 8.47%, and 10.29% 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

VEA vs. VYM - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VEA $10,000 $19,290 7.05%
VYM $10,000 $33,914 12.20%

A $10,000 investment in VEA would have resulted in a final balance of $19,290. This is a profit of $9,290 over 11 years and amounts to a compound annual growth rate (CAGR) of 7.05%.

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%.

VEA’s CAGR is 5.15 percentage points lower than that of VYM and as a result, would have yielded $14,624 less on a $10,000 investment. Thus, VEA performed worse than VYM by 5.15% annually.


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