VYM vs. GOVT: What’s The Difference?

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the iShares U.S. Treasury Bond ETF (GOVT) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and GOVT is a iShares Intermediate Government fund. So, what’s the difference between VYM and GOVT? And which fund is better?

The expense ratio of VYM is 0.01 percentage points higher than GOVT’s (0.06% vs. 0.05%). VYM also has a high exposure to the financial services sector while GOVT is mostly comprised of AAA bonds. Overall, VYM has provided higher returns than GOVT over the past ten years.

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

Summary

VYM GOVT
Name Vanguard High Dividend Yield Index Fund ETF Shares iShares U.S. Treasury Bond ETF
Category Large Value Intermediate Government
Issuer Vanguard iShares
AUM 48.5B 17.07B
Avg. Return 12.20% 2.67%
Div. Yield 2.79% 1.0%
Expense Ratio 0.06% 0.05%

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 U.S. Treasury Bond ETF (GOVT) is a Intermediate Government fund that is issued by iShares. It currently has 17.07B total assets under management and has yielded an average annual return of 2.67% over the past 10 years. The fund has a dividend yield of 1.0% with an expense ratio of 0.05%.

VYM’s dividend yield is 1.79% higher than that of GOVT (2.79% vs. 1.0%). Also, VYM yielded on average 9.52% more per year over the past decade (12.20% vs. 2.67%). The expense ratio of VYM is 0.01 percentage points higher than GOVT’s (0.06% vs. 0.05%).

Fund Composition

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%.

GOVT - Holdings

GOVT Bond Sectors Weight
AAA 100.0%
Others 0.0%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

GOVT’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 100.0%, 0.0%, 0.0%, 0.0%, and 0.0%. The fund is less weighted towards BBB (0.0%), A (0.0%), and AA (0.0%) rated bonds.

Risk Analysis

VYM GOVT
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 Mean Return of 1.04 with a R-squared of 88.88 and a Standard Deviation of 12.69. Its Treynor Ratio is 13.24 while VYM’s Sharpe Ratio is 0.93. Furthermore, the fund has a Beta of 0.88 and a Alpha of -0.7.

The iShares U.S. Treasury Bond ETF (GOVT) has a Alpha of 0 with a Mean Return of 0 and a R-squared of 0. Its Treynor Ratio is 0 while GOVT’s Standard Deviation is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Beta of 0.

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

Performance

Annual Returns

VYM vs. GOVT - Annual Returns

Year VYM GOVT
2020 1.14% 7.92%
2019 24.2% 6.71%
2018 -5.87% 0.74%
2017 16.42% 2.19%
2016 16.87% 0.92%
2015 0.33% 0.76%
2014 13.47% 4.99%
2013 30.26% -2.84%
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 GOVT, returning 7.92% on an annual basis. The poorest year for GOVT in the last ten years was 2013, with a yield of -2.84%. Most years the iShares U.S. Treasury Bond ETF has given investors modest returns, such as in 2018, 2015, and 2016, when gains were 0.74%, 0.76%, and 0.92% respectively.

Portfolio Growth

VYM vs. GOVT - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $23,857 12.20%
GOVT $10,000 $12,297 2.67%

A $10,000 investment in VYM would have resulted in a final balance of $23,857. This is a profit of $13,857 over 8 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

With a $10,000 investment in GOVT, the end total would have been $12,297. This equates to a $2,297 profit over 8 years and a compound annual growth rate (CAGR) of 2.67%.

VYM’s CAGR is 9.52 percentage points higher than that of GOVT and as a result, would have yielded $11,560 more on a $10,000 investment. Thus, VYM outperformed GOVT by 9.52% annually.


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