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VYM vs. TLT: What’s The Difference?

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the iShares 20+ Year Treasury Bond ETF (TLT) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and TLT is a iShares Long Government fund. So, what’s the difference between VYM and TLT? And which fund is better?

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

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

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Summary

VYMTLT
NameVanguard High Dividend Yield Index Fund ETF SharesiShares 20+ Year Treasury Bond ETF
CategoryLarge ValueLong Government
IssuerVanguardiShares
AUM48.5B15.15B
Avg. Return12.20%9.00%
Div. Yield2.79%1.5%
Expense Ratio0.06%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 20+ Year Treasury Bond ETF (TLT) is a Long Government fund that is issued by iShares. It currently has 15.15B total assets under management and has yielded an average annual return of 9.00% over the past 10 years. The fund has a dividend yield of 1.5% with an expense ratio of 0.15%.

VYM’s dividend yield is 1.29% higher than that of TLT (2.79% vs. 1.5%). Also, VYM yielded on average 3.20% more per year over the past decade (12.20% vs. 9.00%). The expense ratio of VYM is 0.09 percentage points lower than TLT’s (0.06% vs. 0.15%).

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Fund Composition

Holdings

VYM - Holdings

VYM HoldingsWeight
JPMorgan Chase & Co3.53%
Johnson & Johnson3.28%
The Home Depot Inc2.59%
Procter & Gamble Co2.48%
Bank of America Corp2.35%
Exxon Mobil Corp2.02%
Comcast Corp Class A1.96%
Verizon Communications Inc1.75%
Intel Corp1.71%
Cisco Systems Inc1.69%

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%.

TLT - Holdings

TLT Bond SectorsWeight
AAA100.0%
Others0.0%
Below B0.0%
B0.0%
BB0.0%
BBB0.0%
A0.0%
AA0.0%
US Government0.0%

TLT’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.

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Risk Analysis

VYMTLT
Mean Return1.040.63
R-squared88.8868.76
Std. Deviation12.6912.76
Alpha-0.7-2.83
Beta0.883.54
Sharpe Ratio0.930.55
Treynor Ratio13.241.82

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

The iShares 20+ Year Treasury Bond ETF (TLT) has a Alpha of -2.83 with a R-squared of 68.76 and a Treynor Ratio of 1.82. Its Sharpe Ratio is 0.55 while TLT’s Mean Return is 0.63. Furthermore, the fund has a Standard Deviation of 12.76 and a Beta of 3.54.

VYM’s Mean Return is 0.41 points higher than that of TLT and its R-squared is 20.12 points higher. With a Standard Deviation of 12.69, VYM is slightly less volatile than TLT. The Alpha and Beta of VYM are 2.13 points higher and 2.66 points lower than TLT’s Alpha and Beta.

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Performance

Annual Returns

VYM vs. TLT - Annual Returns

YearVYMTLT
20201.14%17.92%
201924.2%14.93%
2018-5.87%-2.07%
201716.42%8.92%
201616.87%1.36%
20150.33%-1.65%
201413.47%27.35%
201330.26%-13.91%
201212.68%3.25%
201110.5%33.6%
201014.17%9.25%

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 TLT, returning 33.6% on an annual basis. The poorest year for TLT in the last ten years was 2013, with a yield of -13.91%. Most years the iShares 20+ Year Treasury Bond ETF has given investors modest returns, such as in 2012, 2017, and 2010, when gains were 3.25%, 8.92%, and 9.25% respectively.

Portfolio Growth

VYM vs. TLT - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VYM$10,000$33,91412.20%
TLT$10,000$23,8099.00%

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 TLT, the end total would have been $23,809. This equates to a $13,809 profit over 11 years and a compound annual growth rate (CAGR) of 9.00%.

VYM’s CAGR is 3.20 percentage points higher than that of TLT and as a result, would have yielded $10,105 more on a $10,000 investment. Thus, VYM outperformed TLT by 3.20% annually.


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