VYM vs. SHY: What’s The Difference?

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the iShares 1-3 Year Treasury Bond ETF (SHY) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and SHY is a iShares Short Government fund. So, what’s the difference between VYM and SHY? And which fund is better?

The expense ratio of VYM is 0.09 percentage points lower than SHY’s (0.06% vs. 0.15%). VYM also has a high exposure to the financial services sector while SHY is mostly comprised of AAA bonds. Overall, VYM has provided higher returns than SHY over the past ten years.

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

Summary

VYM SHY
Name Vanguard High Dividend Yield Index Fund ETF Shares iShares 1-3 Year Treasury Bond ETF
Category Large Value Short Government
Issuer Vanguard iShares
AUM 48.5B 19.51B
Avg. Return 12.20% 1.27%
Div. Yield 2.79% 0.46%
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 1-3 Year Treasury Bond ETF (SHY) is a Short Government fund that is issued by iShares. It currently has 19.51B total assets under management and has yielded an average annual return of 1.27% over the past 10 years. The fund has a dividend yield of 0.46% with an expense ratio of 0.15%.

VYM’s dividend yield is 2.33% higher than that of SHY (2.79% vs. 0.46%). Also, VYM yielded on average 10.92% more per year over the past decade (12.20% vs. 1.27%). The expense ratio of VYM is 0.09 percentage points lower than SHY’s (0.06% vs. 0.15%).

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%.

SHY - Holdings

SHY Bond Sectors Weight
AAA 99.67%
Others 0.33%
Below B 0.0%
B 0.0%
BB 0.0%
BBB 0.0%
A 0.0%
AA 0.0%
US Government 0.0%

SHY’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.67%, 0.33%, 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 SHY
Mean Return 1.04 0.09
R-squared 88.88 39.11
Std. Deviation 12.69 0.89
Alpha -0.7 -0.03
Beta 0.88 0.18
Sharpe Ratio 0.93 0.54
Treynor Ratio 13.24 2.6

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

The iShares 1-3 Year Treasury Bond ETF (SHY) has a Treynor Ratio of 2.6 with a R-squared of 39.11 and a Alpha of -0.03. Its Sharpe Ratio is 0.54 while SHY’s Beta is 0.18. Furthermore, the fund has a Mean Return of 0.09 and a Standard Deviation of 0.89.

VYM’s Mean Return is 0.95 points higher than that of SHY and its R-squared is 49.77 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than SHY. The Alpha and Beta of VYM are 0.67 points lower and 0.70 points higher than SHY’s Alpha and Beta.

Performance

Annual Returns

VYM vs. SHY - Annual Returns

Year VYM SHY
2020 1.14% 3.01%
2019 24.2% 3.42%
2018 -5.87% 1.45%
2017 16.42% 0.27%
2016 16.87% 0.75%
2015 0.33% 0.43%
2014 13.47% 0.48%
2013 30.26% 0.23%
2012 12.68% 0.31%
2011 10.5% 1.43%
2010 14.17% 2.23%

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 2019 was the strongest year for SHY, returning 3.42% on an annual basis. The poorest year for SHY in the last ten years was 2013, with a yield of 0.23%. Most years the iShares 1-3 Year Treasury Bond ETF has given investors modest returns, such as in 2014, 2016, and 2011, when gains were 0.48%, 0.75%, and 1.43% respectively.

Portfolio Growth

VYM vs. SHY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $33,914 12.20%
SHY $10,000 $11,486 1.27%

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 SHY, the end total would have been $11,486. This equates to a $1,486 profit over 11 years and a compound annual growth rate (CAGR) of 1.27%.

VYM’s CAGR is 10.92 percentage points higher than that of SHY and as a result, would have yielded $22,428 more on a $10,000 investment. Thus, VYM outperformed SHY by 10.92% annually.


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