The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between VYM and EMB? And which fund is better?
The expense ratio of VYM is 0.33 percentage points lower than EMB’s (0.06% vs. 0.39%). VYM also has a high exposure to the financial services sector while EMB is mostly comprised of BBB bonds. Overall, VYM has provided higher returns than EMB over the past ten years.
In this article, we’ll compare VYM vs. EMB. We’ll look at fund composition and risk metrics, as well as at their industry exposure and annual returns. Moreover, I’ll also discuss VYM’s and EMB’s holdings, portfolio growth, and performance and examine how these affect their overall returns.
|Name||Vanguard High Dividend Yield Index Fund ETF Shares||iShares J.P. Morgan USD Emerging Markets Bond ETF|
|Category||Large Value||Emerging Markets Bond|
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 J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
VYM’s dividend yield is 1.06% lower than that of EMB (2.79% vs. 3.85%). Also, VYM yielded on average 5.76% more per year over the past decade (12.20% vs. 6.43%). The expense ratio of VYM is 0.33 percentage points lower than EMB’s (0.06% vs. 0.39%).
|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%|
|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%.
|EMB Bond Sectors||Weight|
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a R-squared of 88.88 with a Sharpe Ratio of 0.93 and a Alpha of -0.7. Its Treynor Ratio is 13.24 while VYM’s Standard Deviation is 12.69. Furthermore, the fund has a Mean Return of 1.04 and a Beta of 0.88.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Sharpe Ratio of 0.55 with a Treynor Ratio of 3.24 and a R-squared of 23.34. Its Beta is 1.36 while EMB’s Mean Return is 0.44. Furthermore, the fund has a Standard Deviation of 8.44 and a Alpha of 0.89.
VYM’s Mean Return is 0.60 points higher than that of EMB and its R-squared is 65.54 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than EMB. The Alpha and Beta of VYM are 1.59 points lower and 0.48 points lower than EMB’s Alpha and Beta.
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 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
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 EMB, the end total would have been $19,295. This equates to a $9,295 profit over 11 years and a compound annual growth rate (CAGR) of 6.43%.
VYM’s CAGR is 5.76 percentage points higher than that of EMB and as a result, would have yielded $14,619 more on a $10,000 investment. Thus, VYM outperformed EMB by 5.76% annually.
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