VTV vs VYM Understanding the Key Differences

VTV and VYM are two popular exchange-traded funds (ETFs) offered by Vanguard that are often compared to each other. Both funds have a similar investment strategy in that they aim to track the performance of large-cap value stocks in the US market. However, they differ in a few key areas that can impact an investor’s decision on which one to choose.

VTV vs VYM: One of the main differences between VTV and VYM is their expense ratio. VTV has a lower expense ratio of 0.04%, while VYM’s expense ratio is slightly higher at 0.06%. This means that investors who choose VTV will pay less in fees over time, which can have a significant impact on their investment returns.

Another difference between the two funds is their sector exposure. VTV has a higher exposure to the financial services sector, while VYM has a higher exposure to the healthcare sector. This can be important for investors who want to target specific sectors or industries in their portfolio.

Understanding the differences between VTV and VYM can help investors make informed decisions about which fund is best suited for their investment goals and risk tolerance.

Overview of VTV vs VYM

The Vanguard Value Index Fund ETF Shares (VTV) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both among the Top 100 ETFs.

Although both are Vanguard Large Value funds, there are differences between VTV and VYM that investors should consider before investing in either ETF.

The expense ratio of VTV is 0.02 percentage points lower than VYM’s (0.04% vs. 0.06%). This means that VTV is slightly cheaper to own than VYM. However, VTV has a higher exposure to the financial services sector, which may be a positive or negative depending on an investor’s goals and risk tolerance.

Another difference between VTV and VYM is their standard deviation. VTV has a higher standard deviation than VYM, which means that it has higher volatility and a greater potential for both gains and losses. This may be a consideration for investors who are more risk-averse.

Over the past ten years, VYM has provided higher returns than VTV.

Past performance is not necessarily indicative of future results, and investors should consider a variety of factors before making any investment decisions.

Investment Objectives

The Vanguard Value Index Fund ETF Shares (VTV) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both large value funds that seek to track the performance of their respective benchmarks.

VTV aims to track the performance of the CRSP US Large Cap Value Index, while VYM tracks the FTSE High Dividend Yield Index.

While both funds have similar investment objectives, there are some differences in their approach. VTV focuses on large-cap value stocks with lower prices relative to their earnings, book value, and sales.

On the other hand, VYM emphasizes high dividend yield stocks that have a history of paying consistent dividends.

Investors who want exposure to value stocks and are looking for a low-cost option may prefer VTV. On the other hand, investors who prioritize dividend income and are comfortable with slightly higher fees may prefer VYM.

Composition and Holdings

Table Comparison Of VTV vs VYM

VTV and VYM are both large-cap value ETFs that track different indexes. VTV tracks the CRSP US Large Cap Value Index, while VYM tracks the FTSE High Dividend Yield Index. The following table compares the two funds:

VTVVYM
Expense Ratio0.04%0.06%
Number of Holdings355426
Top SectorFinancial ServicesTechnology
Top HoldingBerkshire Hathaway Inc Class BMicrosoft Corporation

Sector Allocation

VTV has a higher exposure to the financial services sector, with 23.7% of its holdings in this sector, compared to VYM’s 14.5%.

On the other hand, VYM has a higher exposure to the technology sector, with 22.5% of its holdings in this sector, compared to VTV’s 13.7%. Both funds have a similar allocation to the healthcare and consumer goods sectors.

Top Holdings

VTV’s top holding is Berkshire Hathaway Inc Class B, which makes up 6.4% of its portfolio. VYM’s top holding is Microsoft Corporation, which makes up 7.6% of its portfolio.

Both funds have a similar allocation to the financial services sector, with VTV holding JPMorgan Chase & Co and Bank of America Corp, while VYM holds JPMorgan Chase & Co and Johnson & Johnson.

VTV and VYM have different compositions and holdings. VTV has a higher exposure to the financial services sector and a higher standard deviation, while VYM has a higher exposure to the technology sector.

Both funds have similar allocations to the healthcare and consumer goods sectors. Investors should consider their investment goals and risk tolerance when choosing between the two funds.

Performance Comparison

Historical Returns

When it comes to historical returns, VYM has outperformed VTV over the past ten years. According to Morningstar, VYM has had an average annual return of 12.75% compared to VTV’s 11.91%. However, it’s important to note that past performance is not a guarantee of future results.

Risk and Volatility

VTV and VYM have different risk profiles. VTV has a higher standard deviation than VYM, which means that it has higher volatility. However, VTV also has a higher Sharpe ratio, which measures risk-adjusted returns. According to ETF Database, VTV has a Sharpe ratio of 1.11 compared to VYM’s 0.80.

Portfolio Composition

VTV and VYM have different industry exposures. VTV has a higher exposure to the financial services sector, while VYM has a higher exposure to the consumer goods sector.

According to Morningstar, VTV’s top three holdings are Berkshire Hathaway, JPMorgan Chase, and Johnson & Johnson. VYM’s top three holdings are Johnson & Johnson, Procter & Gamble, and Verizon Communications.

In terms of fund composition, VTV and VYM are both passive ETFs that aim to replicate the performance of their underlying indexes.

VTV tracks the CRSP US Large Cap Value Index, while VYM tracks the FTSE High Dividend Yield Index.

When it comes to performance, VYM has provided higher returns than VTV over the past ten years.

VTV has a higher Sharpe ratio and exposure to the financial services sector. Investors should consider their personal investment goals and risk tolerance when choosing between VTV and VYM.

Expense Ratio and Tax Efficiency

One of the key differences between VTV and VYM is their expense ratio. The expense ratio for VTV is 0.02 percentage points lower than VYM’s at 0.04% vs. 0.06%.

This means that VTV is slightly cheaper to own than VYM. However, it’s important to note that expense ratios can change over time, so investors should keep an eye on this metric.

Another important factor to consider when comparing VTV vs. VYM is their tax efficiency. Both funds are tax-efficient, but VYM has a higher dividend yield than VTV.

This means that VYM may be subject to higher taxes on dividends. However, both funds have historically been tax-efficient, so investors should consult with a tax professional before making any investment decisions.

It’s worth noting that VTV has a higher exposure to the financial services sector than VYM. This means that VTV may be more sensitive to changes in the financial markets.

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Additionally, VTV has a higher standard deviation than VYM, which means that it has a greater potential for volatility. However, this also means that VTV may offer higher potential returns.

While VTV has provided lower returns than VYM over the past ten years, it’s important to consider the expense ratio, tax efficiency, and other factors when deciding which fund is right for you.

Investors should carefully review each fund’s holdings, performance, and other metrics before making any investment decisions.

Verdict: VTV vs VYM

The Vanguard Value Index Fund ETF Shares (VTV) and the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) are both popular ETFs that track large-cap value stocks in the US.

While they share many similarities, there are some key differences that investors should be aware of before choosing which fund to invest in.

The expense ratio of VTV is 0.02 percentage points lower than VYM’s (0.04% vs. 0.06%). This means that VTV is slightly cheaper to own than VYM, which may be an important factor for cost-conscious investors.

VTV has a higher exposure to the financial services sector than VYM, which may make it more sensitive to changes in interest rates and economic conditions. VTV also has a higher standard deviation than VYM, which means that it has historically been more volatile than VYM.

When it comes to performance, VYM has provided higher returns than VTV over the past ten years. This is due in part to VYM’s higher exposure to dividend-paying stocks, which have outperformed the broader market in recent years.

It’s important to note that past performance is not necessarily indicative of future results, and that both funds have their own unique strengths and weaknesses. Investors should carefully consider their own investment objectives, risk tolerance, and time horizon before deciding which fund to invest in.

While both VTV and VYM are excellent ETFs that provide exposure to large-cap value stocks in the US, they have some key differences that investors should be aware of. Ultimately, the choice between VTV and VYM will depend on an investor’s individual preferences and investment goals.

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