VYM vs. ARKK: What’s The Difference?

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

The expense ratio of VYM is 0.69 percentage points lower than ARKK’s (0.06% vs. 0.75%). VYM also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VYM has provided lower returns than ARKK over the past ten years.

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

Summary

VYM ARKK
Name Vanguard High Dividend Yield Index Fund ETF Shares ARK Innovation ETF
Category Large Value Mid-Cap Growth
Issuer Vanguard ARK ETF Trust
AUM 48.5B 25.52B
Avg. Return 12.20% 55.45%
Div. Yield 2.79% 0.0%
Expense Ratio 0.06% 0.75%

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 ARK Innovation ETF (ARKK) is a Mid-Cap Growth fund that is issued by ARK ETF Trust. It currently has 25.52B total assets under management and has yielded an average annual return of 55.45% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.75%.

VYM’s dividend yield is 2.79% higher than that of ARKK (2.79% vs. 0.0%). Also, VYM yielded on average 43.25% less per year over the past decade (12.20% vs. 55.45%). The expense ratio of VYM is 0.69 percentage points lower than ARKK’s (0.06% vs. 0.75%).

Fund Composition

Industry Exposure

VYM vs. ARKK - Industry Exposure

VYM ARKK
Technology 9.77% 30.5%
Industrials 10.14% 2.11%
Energy 7.12% 0.0%
Communication Services 5.91% 25.01%
Utilities 7.27% 0.0%
Healthcare 13.61% 29.47%
Consumer Defensive 14.13% 0.93%
Real Estate 0.02% 0.51%
Financial Services 22.05% 0.04%
Consumer Cyclical 5.57% 11.42%
Basic Materials 4.41% 0.0%

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 ARK Innovation ETF (ARKK) has the most exposure to the Technology sector at 30.5%. This is followed by Healthcare and Communication Services at 29.47% and 25.01% respectively. Utilities (0.0%), Energy (0.0%), and Financial Services (0.04%) only make up 0.04% of the fund’s total assets.

ARKK’s mid-section with moderate exposure is comprised of Real Estate, Consumer Defensive, Industrials, Consumer Cyclical, and Communication Services stocks at 0.51%, 0.93%, 2.11%, 11.42%, and 25.01%.

VYM is 22.01% more exposed to the Financial Services sector than ARKK (22.05% vs 0.04%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 13.20% higher and 15.86% lower respectively (14.13% vs. 0.93% and 13.61% vs. 29.47%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 20.54% less of the fund’s holdings compared to ARKK (15.89% vs. 36.43%).

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%.

ARKK - Holdings

ARKK Holdings Weight
Tesla Inc 9.56%
Roku Inc Class A 6.48%
Teladoc Health Inc 5.76%
Square Inc A 4.37%
Zoom Video Communications Inc 4.36%
Shopify Inc A 4.27%
Spotify Technology SA 3.68%
Twilio Inc A 3.66%
Coinbase Global Inc Ordinary Shares – Class A 3.65%
Unity Software Inc Ordinary Shares 3.41%

ARKK’s Top Holdings are Tesla Inc, Roku Inc Class A, Teladoc Health Inc, Square Inc A, and Zoom Video Communications Inc at 9.56%, 6.48%, 5.76%, 4.37%, and 4.36%.

Shopify Inc A (4.27%), Spotify Technology SA (3.68%), and Twilio Inc A (3.66%) have a slightly smaller but still significant weight. Coinbase Global Inc Ordinary Shares – Class A and Unity Software Inc Ordinary Shares are also represented in the ARKK’s holdings at 3.65% and 3.41%.

Risk Analysis

VYM ARKK
Mean Return 1.04 0
R-squared 88.88 0
Std. Deviation 12.69 0
Alpha -0.7 0
Beta 0.88 0
Sharpe Ratio 0.93 0
Treynor Ratio 13.24 0

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

The ARK Innovation ETF (ARKK) has a Sharpe Ratio of 0 with a Alpha of 0 and a Beta of 0. Its Standard Deviation is 0 while ARKK’s Treynor Ratio is 0. Furthermore, the fund has a R-squared of 0 and a Mean Return of 0.

VYM’s Mean Return is 1.04 points higher than that of ARKK and its R-squared is 88.88 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than ARKK. The Alpha and Beta of VYM are 0.70 points lower and 0.88 points higher than ARKK’s Alpha and Beta.

Performance

Annual Returns

VYM vs. ARKK - Annual Returns

Year VYM ARKK
2020 1.14% 152.52%
2019 24.2% 35.73%
2018 -5.87% 3.58%
2017 16.42% 87.38%
2016 16.87% -1.96%
2015 0.33% 3.76%
2014 13.47% 0.0%
2013 30.26% 0.0%
2012 12.68% 0.0%
2011 10.5% 0.0%
2010 14.17% 0.0%

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 2020 was the strongest year for ARKK, returning 152.52% on an annual basis. The poorest year for ARKK in the last ten years was 2016, with a yield of -1.96%. Most years the ARK Innovation ETF has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 3.58% respectively.

Portfolio Growth

VYM vs. ARKK - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $16,088 12.20%
ARKK $10,000 $65,218 55.45%

A $10,000 investment in VYM would have resulted in a final balance of $16,088. This is a profit of $6,088 over 5 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

With a $10,000 investment in ARKK, the end total would have been $65,218. This equates to a $55,218 profit over 5 years and a compound annual growth rate (CAGR) of 55.45%.

VYM’s CAGR is 43.25 percentage points lower than that of ARKK and as a result, would have yielded $49,130 less on a $10,000 investment. Thus, VYM performed worse than ARKK by 43.25% annually.


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