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VUG vs. VYM: What’s The Difference?

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

The expense ratio of VUG is 0.02 percentage points lower than VYM’s (0.04% vs. 0.06%). VUG also has a higher exposure to the technology sector and a higher standard deviation. Overall, VUG has provided higher returns than VYM over the past ten years.

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

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Summary

VUGVYM
NameVanguard Growth Index Fund ETF SharesVanguard High Dividend Yield Index Fund ETF Shares
CategoryLarge GrowthLarge Value
IssuerVanguardVanguard
AUM165.53B48.5B
Avg. Return17.58%12.20%
Div. Yield0.57%2.79%
Expense Ratio0.04%0.06%

The Vanguard Growth Index Fund ETF Shares (VUG) is a Large Growth fund that is issued by Vanguard. It currently has 165.53B total assets under management and has yielded an average annual return of 17.58% over the past 10 years. The fund has a dividend yield of 0.57% with an expense ratio of 0.04%.

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%.

VUG’s dividend yield is 2.22% lower than that of VYM (0.57% vs. 2.79%). Also, VUG yielded on average 5.38% more per year over the past decade (17.58% vs. 12.20%). The expense ratio of VUG is 0.02 percentage points lower than VYM’s (0.04% vs. 0.06%).

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Fund Composition

Industry Exposure

VUG vs. VYM - Industry Exposure

VUGVYM
Technology39.05%9.77%
Industrials5.13%10.14%
Energy0.32%7.12%
Communication Services16.49%5.91%
Utilities0.0%7.27%
Healthcare8.09%13.61%
Consumer Defensive2.41%14.13%
Real Estate2.46%0.02%
Financial Services6.75%22.05%
Consumer Cyclical17.78%5.57%
Basic Materials1.52%4.41%

The Vanguard Growth Index Fund ETF Shares (VUG) has the most exposure to the Technology sector at 39.05%. This is followed by Consumer Cyclical and Communication Services at 17.78% and 16.49% respectively. Energy (0.32%), Basic Materials (1.52%), and Consumer Defensive (2.41%) only make up 4.25% of the fund’s total assets.

VUG’s mid-section with moderate exposure is comprised of Real Estate, Industrials, Financial Services, Healthcare, and Communication Services stocks at 2.46%, 5.13%, 6.75%, 8.09%, and 16.49%.

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%.

VUG is 29.28% more exposed to the Technology sector than VYM (39.05% vs 9.77%). VUG’s exposure to Consumer Cyclical and Communication Services stocks is 12.21% higher and 10.58% higher respectively (17.78% vs. 5.57% and 16.49% vs. 5.91%). In total, Energy, Basic Materials, and Consumer Defensive also make up 21.41% less of the fund’s holdings compared to VYM (4.25% vs. 25.66%).

Holdings

VUG - Holdings

VUG HoldingsWeight
Apple Inc10.13%
Microsoft Corp9.52%
Amazon.com Inc6.88%
Facebook Inc Class A3.89%
Alphabet Inc Class A3.43%
Alphabet Inc Class C3.22%
Tesla Inc2.44%
NVIDIA Corp2.21%
Visa Inc Class A1.78%
PayPal Holdings Inc1.6%

VUG’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 10.13%, 9.52%, 6.88%, 3.89%, and 3.43%.

Alphabet Inc Class C (3.22%), Tesla Inc (2.44%), and NVIDIA Corp (2.21%) have a slightly smaller but still significant weight. Visa Inc Class A and PayPal Holdings Inc are also represented in the VUG’s holdings at 1.78% and 1.6%.

VYM - Holdings

VYM HoldingsWeight
JPMorgan Chase & Co3.53%
Johnson & Johnson3.28%
The Home Depot Inc2.59%
Procter & Gamble Co2.48%
Bank of America Corp2.35%
Exxon Mobil Corp2.02%
Comcast Corp Class A1.96%
Verizon Communications Inc1.75%
Intel Corp1.71%
Cisco Systems Inc1.69%

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

VUGVYM
Mean Return1.441.04
R-squared92.4888.88
Std. Deviation14.7612.69
Alpha1.81-0.7
Beta1.040.88
Sharpe Ratio1.130.93
Treynor Ratio16.1313.24

The Vanguard Growth Index Fund ETF Shares (VUG) has a Standard Deviation of 14.76 with a Treynor Ratio of 16.13 and a Alpha of 1.81. Its Sharpe Ratio is 1.13 while VUG’s Mean Return is 1.44. Furthermore, the fund has a R-squared of 92.48 and a Beta of 1.04.

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

VUG’s Mean Return is 0.40 points higher than that of VYM and its R-squared is 3.60 points higher. With a Standard Deviation of 14.76, VUG is slightly more volatile than VYM. The Alpha and Beta of VUG are 2.51 points higher and 0.16 points higher than VYM’s Alpha and Beta.

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Performance

Annual Returns

VUG vs. VYM - Annual Returns

YearVUGVYM
202040.16%1.14%
201937.26%24.2%
2018-3.32%-5.87%
201727.8%16.42%
20166.13%16.87%
20153.32%0.33%
201413.62%13.47%
201332.38%30.26%
201217.03%12.68%
20111.87%10.5%
201017.11%14.17%

VUG had its best year in 2020 with an annual return of 40.16%. VUG’s worst year over the past decade yielded -3.32% and occurred in 2018. In most years the Vanguard Growth Index Fund ETF Shares provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.62%, 17.03%, and 17.11% 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

VUG vs. VYM - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VUG$10,000$54,73517.58%
VYM$10,000$33,91412.20%

A $10,000 investment in VUG would have resulted in a final balance of $54,735. This is a profit of $44,735 over 11 years and amounts to a compound annual growth rate (CAGR) of 17.58%.

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%.

VUG’s CAGR is 5.38 percentage points higher than that of VYM and as a result, would have yielded $20,821 more on a $10,000 investment. Thus, VUG outperformed VYM by 5.38% annually.


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