VYM vs. TQQQ: What’s The Difference?

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between VYM and TQQQ? And which fund is better?

The expense ratio of VYM is 0.89 percentage points lower than TQQQ’s (0.06% vs. 0.95%). VYM also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VYM has provided lower returns than TQQQ over the past ten years.

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

Summary

VYM TQQQ
Name Vanguard High Dividend Yield Index Fund ETF Shares ProShares UltraPro QQQ
Category Large Value Trading–Leveraged Equity
Issuer Vanguard ProShares
AUM 48.5B 12.41B
Avg. Return 12.20% 61.22%
Div. Yield 2.79% 0.0%
Expense Ratio 0.06% 0.95%

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 ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

VYM’s dividend yield is 2.79% higher than that of TQQQ (2.79% vs. 0.0%). Also, VYM yielded on average 49.02% less per year over the past decade (12.20% vs. 61.22%). The expense ratio of VYM is 0.89 percentage points lower than TQQQ’s (0.06% vs. 0.95%).

Fund Composition

Industry Exposure

VYM vs. TQQQ - Industry Exposure

VYM TQQQ
Technology 9.77% 0.0%
Industrials 10.14% 0.0%
Energy 7.12% 0.0%
Communication Services 5.91% 0.0%
Utilities 7.27% 0.0%
Healthcare 13.61% 0.0%
Consumer Defensive 14.13% 0.0%
Real Estate 0.02% 0.0%
Financial Services 22.05% 0.0%
Consumer Cyclical 5.57% 0.0%
Basic Materials 4.41% 0.0%

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 ProShares UltraPro QQQ (TQQQ) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

TQQQ’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VYM is 22.05% more exposed to the Financial Services sector than TQQQ (22.05% vs 0.0%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 14.13% higher and 13.61% higher respectively (14.13% vs. 0.0% and 13.61% vs. 0.0%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 15.89% more of the fund’s holdings compared to TQQQ (15.89% vs. 0.00%).

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%.

TQQQ - Holdings

TQQQ Holdings Weight
Nasdaq 100 Index Swap Goldman Sachs International 45.11%
Nasdaq 100 Index Swap Societe Generale 44.73%
Nasdaq 100 Index Swap Bnp Paribas 38.05%
Nasdaq 100 Index Swap Bank Of America Na 31.53%
Nasdaq 100 Index Swap Citibank Na 31.49%
Nasdaq 100 Index Swap Jp Morgan Securities 26.2%
Apple Inc 7.49%
Microsoft Corp 6.69%
Nasdaq 100 Index Swap Credit Suisse International 5.9%
Amazon.com Inc 5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

Risk Analysis

VYM TQQQ
Mean Return 1.04 4.65
R-squared 88.88 83.64
Std. Deviation 12.69 50.08
Alpha -0.7 7.29
Beta 0.88 3.37
Sharpe Ratio 0.93 1.1
Treynor Ratio 13.24 15.65

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 Sharpe Ratio of 0.93. Its Alpha is -0.7 while VYM’s Standard Deviation is 12.69. Furthermore, the fund has a Beta of 0.88 and a Treynor Ratio of 13.24.

The ProShares UltraPro QQQ (TQQQ) has a Sharpe Ratio of 1.1 with a Treynor Ratio of 15.65 and a Alpha of 7.29. Its Beta is 3.37 while TQQQ’s Standard Deviation is 50.08. Furthermore, the fund has a R-squared of 83.64 and a Mean Return of 4.65.

VYM’s Mean Return is 3.61 points lower than that of TQQQ and its R-squared is 5.24 points higher. With a Standard Deviation of 12.69, VYM is slightly less volatile than TQQQ. The Alpha and Beta of VYM are 7.99 points lower and 2.49 points lower than TQQQ’s Alpha and Beta.

Performance

Annual Returns

VYM vs. TQQQ - Annual Returns

Year VYM TQQQ
2020 1.14% 109.85%
2019 24.2% 133.93%
2018 -5.87% -19.65%
2017 16.42% 118.65%
2016 16.87% 11.04%
2015 0.33% 17.41%
2014 13.47% 56.82%
2013 30.26% 139.98%
2012 12.68% 51.95%
2011 10.5% -7.77%
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 2013 was the strongest year for TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

VYM vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $29,705 12.20%
TQQQ $10,000 $593,012 61.22%

A $10,000 investment in VYM would have resulted in a final balance of $29,705. This is a profit of $19,705 over 10 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

With a $10,000 investment in TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

VYM’s CAGR is 49.02 percentage points lower than that of TQQQ and as a result, would have yielded $563,307 less on a $10,000 investment. Thus, VYM performed worse than TQQQ by 49.02% annually.


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