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VYM vs. USMV: What’s The Difference?

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

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

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

Introduction To Mutual Funds
Introduction To Mutual Funds
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Summary

VYMUSMV
NameVanguard High Dividend Yield Index Fund ETF SharesiShares MSCI USA Min Vol Factor ETF
CategoryLarge ValueLarge Blend
IssuerVanguardiShares
AUM48.5B27.6B
Avg. Return12.20%13.89%
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 MSCI USA Min Vol Factor ETF (USMV) is a Large Blend fund that is issued by iShares. It currently has 27.6B total assets under management and has yielded an average annual return of 13.89% 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 USMV (2.79% vs. 1.5%). Also, VYM yielded on average 1.70% less per year over the past decade (12.20% vs. 13.89%). The expense ratio of VYM is 0.09 percentage points lower than USMV’s (0.06% vs. 0.15%).

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Fund Composition

Industry Exposure

VYM vs. USMV - Industry Exposure

VYMUSMV
Technology9.77%20.53%
Industrials10.14%10.51%
Energy7.12%0.21%
Communication Services5.91%11.03%
Utilities7.27%6.93%
Healthcare13.61%18.42%
Consumer Defensive14.13%12.82%
Real Estate0.02%2.73%
Financial Services22.05%9.65%
Consumer Cyclical5.57%5.53%
Basic Materials4.41%1.65%

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 MSCI USA Min Vol Factor ETF (USMV) has the most exposure to the Technology sector at 20.53%. This is followed by Healthcare and Consumer Defensive at 18.42% and 12.82% respectively. Basic Materials (1.65%), Real Estate (2.73%), and Consumer Cyclical (5.53%) only make up 9.91% of the fund’s total assets.

USMV’s mid-section with moderate exposure is comprised of Utilities, Financial Services, Industrials, Communication Services, and Consumer Defensive stocks at 6.93%, 9.65%, 10.51%, 11.03%, and 12.82%.

VYM is 12.40% more exposed to the Financial Services sector than USMV (22.05% vs 9.65%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 1.31% higher and 4.81% lower respectively (14.13% vs. 12.82% and 13.61% vs. 18.42%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 2.32% less of the fund’s holdings compared to USMV (15.89% vs. 18.21%).

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%.

USMV - Holdings

USMV HoldingsWeight
Eli Lilly and Co1.64%
Microsoft Corp1.62%
T-Mobile US Inc1.51%
Accenture PLC Class A1.51%
Visa Inc Class A1.49%
Waste Management Inc1.45%
Adobe Inc1.45%
The Kroger Co1.44%
Johnson & Johnson1.42%
Gilead Sciences Inc1.42%

USMV’s Top Holdings are Eli Lilly and Co, Microsoft Corp, T-Mobile US Inc, Accenture PLC Class A, and Visa Inc Class A at 1.64%, 1.62%, 1.51%, 1.51%, and 1.49%.

Waste Management Inc (1.45%), Adobe Inc (1.45%), and The Kroger Co (1.44%) have a slightly smaller but still significant weight. Johnson & Johnson and Gilead Sciences Inc are also represented in the USMV’s holdings at 1.42% and 1.42%.

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Risk Analysis

VYMUSMV
Mean Return1.040
R-squared88.880
Std. Deviation12.690
Alpha-0.70
Beta0.880
Sharpe Ratio0.930
Treynor Ratio13.240

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

The iShares MSCI USA Min Vol Factor ETF (USMV) has a Alpha of 0 with a Sharpe Ratio of 0 and a Beta of 0. Its Standard Deviation is 0 while USMV’s Mean Return is 0. Furthermore, the fund has a R-squared of 0 and a Treynor Ratio of 0.

VYM’s Mean Return is 1.04 points higher than that of USMV and its R-squared is 88.88 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than USMV. The Alpha and Beta of VYM are 0.70 points lower and 0.88 points higher than USMV’s Alpha and Beta.

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Performance

Annual Returns

VYM vs. USMV - Annual Returns

YearVYMUSMV
20201.14%5.6%
201924.2%27.77%
2018-5.87%1.36%
201716.42%18.97%
201616.87%10.5%
20150.33%5.5%
201413.47%16.34%
201330.26%25.11%
201212.68%11.04%
201110.5%0.0%
201014.17%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 2019 was the strongest year for USMV, returning 27.77% on an annual basis. The poorest year for USMV in the last ten years was 2011, with a yield of 0.0%. Most years the iShares MSCI USA Min Vol Factor ETF has given investors modest returns, such as in 2020, 2016, and 2012, when gains were 5.6%, 10.5%, and 11.04% respectively.

Portfolio Growth

VYM vs. USMV - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
VYM$10,000$23,85712.20%
USMV$10,000$27,60713.89%

A $10,000 investment in VYM would have resulted in a final balance of $23,857. This is a profit of $13,857 over 8 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

With a $10,000 investment in USMV, the end total would have been $27,607. This equates to a $17,607 profit over 8 years and a compound annual growth rate (CAGR) of 13.89%.

VYM’s CAGR is 1.70 percentage points lower than that of USMV and as a result, would have yielded $3,750 less on a $10,000 investment. Thus, VYM performed worse than USMV by 1.70% annually.


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