The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the iShares 7-10 Year Treasury Bond ETF (IEF) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and IEF is a iShares Long Government fund. So, what’s the difference between VYM and IEF? And which fund is better?
The expense ratio of VYM is 0.09 percentage points lower than IEF’s (0.06% vs. 0.15%). VYM also has a high exposure to the financial services sector while IEF is mostly comprised of AAA bonds. Overall, VYM has provided higher returns than IEF over the past ten years.
In this article, we’ll compare VYM vs. IEF. We’ll look at annual returns and holdings, as well as at their industry exposure and performance. Moreover, I’ll also discuss VYM’s and IEF’s portfolio growth, risk metrics, and fund composition and examine how these affect their overall returns.
|Name||Vanguard High Dividend Yield Index Fund ETF Shares||iShares 7-10 Year Treasury Bond ETF|
|Category||Large Value||Long Government|
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 7-10 Year Treasury Bond ETF (IEF) is a Long Government fund that is issued by iShares. It currently has 13.44B total assets under management and has yielded an average annual return of 5.06% over the past 10 years. The fund has a dividend yield of 0.84% with an expense ratio of 0.15%.
VYM’s dividend yield is 1.95% higher than that of IEF (2.79% vs. 0.84%). Also, VYM yielded on average 7.14% more per year over the past decade (12.20% vs. 5.06%). The expense ratio of VYM is 0.09 percentage points lower than IEF’s (0.06% vs. 0.15%).
|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%.
|IEF Bond Sectors||Weight|
IEF’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.
The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Beta of 0.88 with a Standard Deviation of 12.69 and a R-squared of 88.88. Its Treynor Ratio is 13.24 while VYM’s Alpha is -0.7. Furthermore, the fund has a Mean Return of 1.04 and a Sharpe Ratio of 0.93.
The iShares 7-10 Year Treasury Bond ETF (IEF) has a Sharpe Ratio of 0.6 with a Alpha of -1.2 and a Mean Return of 0.32. Its Beta is 1.59 while IEF’s Treynor Ratio is 1.97. Furthermore, the fund has a Standard Deviation of 5.42 and a R-squared of 77.56.
VYM’s Mean Return is 0.72 points higher than that of IEF and its R-squared is 11.32 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than IEF. The Alpha and Beta of VYM are 0.50 points higher and 0.71 points lower than IEF’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 2011 was the strongest year for IEF, returning 15.46% on an annual basis. The poorest year for IEF in the last ten years was 2013, with a yield of -6.12%. Most years the iShares 7-10 Year Treasury Bond ETF has given investors modest returns, such as in 2017, 2012, and 2019, when gains were 2.47%, 4.06%, and 8.38% 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 IEF, the end total would have been $16,936. This equates to a $6,936 profit over 11 years and a compound annual growth rate (CAGR) of 5.06%.
VYM’s CAGR is 7.14 percentage points higher than that of IEF and as a result, would have yielded $16,978 more on a $10,000 investment. Thus, VYM outperformed IEF by 7.14% annually.
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