VYM vs. ACWI: What’s The Difference?

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

The expense ratio of VYM is 0.26 percentage points lower than ACWI’s (0.06% vs. 0.32%). VYM also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VYM has provided higher returns than ACWI over the past ten years.

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

Summary

VYM ACWI
Name Vanguard High Dividend Yield Index Fund ETF Shares iShares MSCI ACWI ETF
Category Large Value N/A
Issuer Vanguard iShares
AUM 48.5B 16.85B
Avg. Return 12.20% 10.21%
Div. Yield 2.79% 1.39%
Expense Ratio 0.06% 0.32%

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%.

The iShares MSCI ACWI ETF (ACWI) is a N/A fund that is issued by iShares. It currently has 16.85B total assets under management and has yielded an average annual return of 10.21% over the past 10 years. The fund has a dividend yield of 1.39% with an expense ratio of 0.32%.

VYM’s dividend yield is 1.40% higher than that of ACWI (2.79% vs. 1.39%). Also, VYM yielded on average 1.98% more per year over the past decade (12.20% vs. 10.21%). The expense ratio of VYM is 0.26 percentage points lower than ACWI’s (0.06% vs. 0.32%).

Fund Composition

Industry Exposure

VYM vs. ACWI - Industry Exposure

VYM ACWI
Technology 9.77% 20.41%
Industrials 10.14% 9.65%
Energy 7.12% 3.48%
Communication Services 5.91% 9.87%
Utilities 7.27% 2.61%
Healthcare 13.61% 11.74%
Consumer Defensive 14.13% 7.15%
Real Estate 0.02% 2.75%
Financial Services 22.05% 15.58%
Consumer Cyclical 5.57% 12.01%
Basic Materials 4.41% 4.73%

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%.

The iShares MSCI ACWI ETF (ACWI) has the most exposure to the Technology sector at 20.41%. This is followed by Financial Services and Consumer Cyclical at 15.58% and 12.01% respectively. Real Estate (2.75%), Energy (3.48%), and Basic Materials (4.73%) only make up 10.96% of the fund’s total assets.

ACWI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Healthcare, and Consumer Cyclical stocks at 7.15%, 9.65%, 9.87%, 11.74%, and 12.01%.

VYM is 6.47% more exposed to the Financial Services sector than ACWI (22.05% vs 15.58%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 6.98% higher and 1.87% higher respectively (14.13% vs. 7.15% and 13.61% vs. 11.74%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 10.72% less of the fund’s holdings compared to ACWI (15.89% vs. 26.61%).

Holdings

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%.

ACWI - Holdings

ACWI Holdings Weight
Apple Inc 3.44%
Microsoft Corp 2.91%
Amazon.com Inc 2.21%
Facebook Inc A 1.25%
Alphabet Inc Class C 1.12%
Alphabet Inc A 1.09%
Taiwan Semiconductor Manufacturing Co Ltd 0.79%
Tesla Inc 0.78%
NVIDIA Corp 0.74%
JPMorgan Chase & Co 0.71%

ACWI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc A, and Alphabet Inc Class C at 3.44%, 2.91%, 2.21%, 1.25%, and 1.12%.

Alphabet Inc A (1.09%), Taiwan Semiconductor Manufacturing Co Ltd (0.79%), and Tesla Inc (0.78%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ACWI’s holdings at 0.74% and 0.71%.

Risk Analysis

VYM ACWI
Mean Return 1.04 0.89
R-squared 88.88 99.96
Std. Deviation 12.69 14.05
Alpha -0.7 0.15
Beta 0.88 1
Sharpe Ratio 0.93 0.71
Treynor Ratio 13.24 9.45

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

The iShares MSCI ACWI ETF (ACWI) has a Alpha of 0.15 with a Beta of 1 and a Sharpe Ratio of 0.71. Its R-squared is 99.96 while ACWI’s Treynor Ratio is 9.45. Furthermore, the fund has a Mean Return of 0.89 and a Standard Deviation of 14.05.

VYM’s Mean Return is 0.15 points higher than that of ACWI and its R-squared is 11.08 points lower. With a Standard Deviation of 12.69, VYM is slightly less volatile than ACWI. The Alpha and Beta of VYM are 0.85 points lower and 0.12 points lower than ACWI’s Alpha and Beta.

Performance

Annual Returns

VYM vs. ACWI - Annual Returns

Year VYM ACWI
2020 1.14% 16.38%
2019 24.2% 26.7%
2018 -5.87% -9.15%
2017 16.42% 24.35%
2016 16.87% 8.22%
2015 0.33% -2.39%
2014 13.47% 4.64%
2013 30.26% 22.91%
2012 12.68% 15.99%
2011 10.5% -7.6%
2010 14.17% 12.31%

VYM had its best year in 2013 with an annual return of 30.26%. VYM’s worst year over the past decade yielded -5.87% and occurred in 2018. In most years the Vanguard High Dividend Yield Index Fund ETF Shares provided moderate returns such as in 2012, 2014, and 2010 where annual returns amounted to 12.68%, 13.47%, and 14.17% respectively.

The year 2019 was the strongest year for ACWI, returning 26.7% on an annual basis. The poorest year for ACWI in the last ten years was 2018, with a yield of -9.15%. Most years the iShares MSCI ACWI ETF has given investors modest returns, such as in 2016, 2010, and 2012, when gains were 8.22%, 12.31%, and 15.99% respectively.

Portfolio Growth

VYM vs. ACWI - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $33,914 12.20%
ACWI $10,000 $27,241 10.21%

A $10,000 investment in VYM would have resulted in a final balance of $33,914. This is a profit of $23,914 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

With a $10,000 investment in ACWI, the end total would have been $27,241. This equates to a $17,241 profit over 11 years and a compound annual growth rate (CAGR) of 10.21%.

VYM’s CAGR is 1.98 percentage points higher than that of ACWI and as a result, would have yielded $6,673 more on a $10,000 investment. Thus, VYM outperformed ACWI by 1.98% annually.


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