VYM vs. IWB: What’s The Difference?

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the iShares Russell 1000 ETF (IWB) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and IWB is a iShares Large Blend fund. So, what’s the difference between VYM and IWB? And which fund is better?

The expense ratio of VYM is 0.09 percentage points lower than IWB’s (0.06% vs. 0.15%). VYM also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VYM has provided lower returns than IWB over the past ten years.

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

Summary

VYM IWB
Name Vanguard High Dividend Yield Index Fund ETF Shares iShares Russell 1000 ETF
Category Large Value Large Blend
Issuer Vanguard iShares
AUM 48.5B 30.54B
Avg. Return 12.20% 14.64%
Div. Yield 2.79% 1.14%
Expense Ratio 0.06% 0.15%

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 Russell 1000 ETF (IWB) is a Large Blend fund that is issued by iShares. It currently has 30.54B total assets under management and has yielded an average annual return of 14.64% over the past 10 years. The fund has a dividend yield of 1.14% with an expense ratio of 0.15%.

VYM’s dividend yield is 1.65% higher than that of IWB (2.79% vs. 1.14%). Also, VYM yielded on average 2.44% less per year over the past decade (12.20% vs. 14.64%). The expense ratio of VYM is 0.09 percentage points lower than IWB’s (0.06% vs. 0.15%).

Fund Composition

Industry Exposure

VYM vs. IWB - Industry Exposure

VYM IWB
Technology 9.77% 25.33%
Industrials 10.14% 8.88%
Energy 7.12% 2.44%
Communication Services 5.91% 10.83%
Utilities 7.27% 2.36%
Healthcare 13.61% 13.35%
Consumer Defensive 14.13% 5.97%
Real Estate 0.02% 3.34%
Financial Services 22.05% 13.64%
Consumer Cyclical 5.57% 11.85%
Basic Materials 4.41% 2.02%

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 Russell 1000 ETF (IWB) has the most exposure to the Technology sector at 25.33%. This is followed by Financial Services and Healthcare at 13.64% and 13.35% respectively. Utilities (2.36%), Energy (2.44%), and Real Estate (3.34%) only make up 8.14% of the fund’s total assets.

IWB’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.97%, 8.88%, 10.83%, 11.85%, and 13.35%.

VYM is 8.41% more exposed to the Financial Services sector than IWB (22.05% vs 13.64%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 8.16% higher and 0.26% higher respectively (14.13% vs. 5.97% and 13.61% vs. 13.35%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 8.81% less of the fund’s holdings compared to IWB (15.89% vs. 24.70%).

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%.

IWB - Holdings

IWB Holdings Weight
Apple Inc 5.45%
Microsoft Corp 5.11%
Amazon.com Inc 3.43%
Facebook Inc Class A 2.03%
Alphabet Inc Class A 1.93%
Alphabet Inc Class C 1.82%
Tesla Inc 1.27%
Berkshire Hathaway Inc Class B 1.24%
NVIDIA Corp 1.11%
JPMorgan Chase & Co 1.09%

IWB’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.45%, 5.11%, 3.43%, 2.03%, and 1.93%.

Alphabet Inc Class C (1.82%), Tesla Inc (1.27%), and Berkshire Hathaway Inc Class B (1.24%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the IWB’s holdings at 1.11% and 1.09%.

Risk Analysis

VYM IWB
Mean Return 1.04 1.27
R-squared 88.88 99.73
Std. Deviation 12.69 13.87
Alpha -0.7 -0.38
Beta 0.88 1.02
Sharpe Ratio 0.93 1.05
Treynor Ratio 13.24 14.31

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

The iShares Russell 1000 ETF (IWB) has a Treynor Ratio of 14.31 with a Mean Return of 1.27 and a Sharpe Ratio of 1.05. Its Beta is 1.02 while IWB’s R-squared is 99.73. Furthermore, the fund has a Standard Deviation of 13.87 and a Alpha of -0.38.

VYM’s Mean Return is 0.23 points lower than that of IWB and its R-squared is 10.85 points lower. With a Standard Deviation of 12.69, VYM is slightly less volatile than IWB. The Alpha and Beta of VYM are 0.32 points lower and 0.14 points lower than IWB’s Alpha and Beta.

Performance

Annual Returns

VYM vs. IWB - Annual Returns

Year VYM IWB
2020 1.14% 20.8%
2019 24.2% 31.26%
2018 -5.87% -4.91%
2017 16.42% 21.53%
2016 16.87% 11.91%
2015 0.33% 0.82%
2014 13.47% 13.08%
2013 30.26% 32.93%
2012 12.68% 16.27%
2011 10.5% 1.36%
2010 14.17% 15.94%

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 2013 was the strongest year for IWB, returning 32.93% on an annual basis. The poorest year for IWB in the last ten years was 2018, with a yield of -4.91%. Most years the iShares Russell 1000 ETF has given investors modest returns, such as in 2014, 2010, and 2012, when gains were 13.08%, 15.94%, and 16.27% respectively.

Portfolio Growth

VYM vs. IWB - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $33,914 12.20%
IWB $10,000 $42,462 14.64%

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 IWB, the end total would have been $42,462. This equates to a $32,462 profit over 11 years and a compound annual growth rate (CAGR) of 14.64%.

VYM’s CAGR is 2.44 percentage points lower than that of IWB and as a result, would have yielded $8,548 less on a $10,000 investment. Thus, VYM performed worse than IWB by 2.44% annually.


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