VYM vs. VEU: What’s The Difference?

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and VEU is a Vanguard Foreign Large Blend fund. So, what’s the difference between VYM and VEU? And which fund is better?

The expense ratio of VYM is 0.02 percentage points lower than VEU’s (0.06% vs. 0.08%). VYM also has a higher exposure to the financial services sector and a lower standard deviation. Overall, VYM has provided higher returns than VEU over the past ten years.

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

Summary

VYM VEU
Name Vanguard High Dividend Yield Index Fund ETF Shares Vanguard FTSE All-World ex-US Index Fund ETF Shares
Category Large Value Foreign Large Blend
Issuer Vanguard Vanguard
AUM 48.5B 53.64B
Avg. Return 12.20% 6.64%
Div. Yield 2.79% 2.31%
Expense Ratio 0.06% 0.08%

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 Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) is a Foreign Large Blend fund that is issued by Vanguard. It currently has 53.64B total assets under management and has yielded an average annual return of 6.64% over the past 10 years. The fund has a dividend yield of 2.31% with an expense ratio of 0.08%.

VYM’s dividend yield is 0.48% higher than that of VEU (2.79% vs. 2.31%). Also, VYM yielded on average 5.56% more per year over the past decade (12.20% vs. 6.64%). The expense ratio of VYM is 0.02 percentage points lower than VEU’s (0.06% vs. 0.08%).

Fund Composition

Industry Exposure

VYM vs. VEU - Industry Exposure

VYM VEU
Technology 9.77% 12.94%
Industrials 10.14% 12.19%
Energy 7.12% 4.69%
Communication Services 5.91% 7.44%
Utilities 7.27% 2.89%
Healthcare 13.61% 9.34%
Consumer Defensive 14.13% 8.28%
Real Estate 0.02% 3.04%
Financial Services 22.05% 18.46%
Consumer Cyclical 5.57% 12.57%
Basic Materials 4.41% 8.17%

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 Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has the most exposure to the Financial Services sector at 18.46%. This is followed by Technology and Consumer Cyclical at 12.94% and 12.57% respectively. Real Estate (3.04%), Energy (4.69%), and Communication Services (7.44%) only make up 15.17% of the fund’s total assets.

VEU’s mid-section with moderate exposure is comprised of Basic Materials, Consumer Defensive, Healthcare, Industrials, and Consumer Cyclical stocks at 8.17%, 8.28%, 9.34%, 12.19%, and 12.57%.

VYM is 3.59% more exposed to the Financial Services sector than VEU (22.05% vs 18.46%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 5.85% higher and 4.27% higher respectively (14.13% vs. 8.28% and 13.61% vs. 9.34%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 12.29% less of the fund’s holdings compared to VEU (15.89% vs. 28.18%).

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%.

VEU - Holdings

VEU Holdings Weight
Tencent Holdings Ltd 1.57%
Alibaba Group Holding Ltd Ordinary Shares 1.4%
Nestle SA 1.22%
Taiwan Semiconductor Manufacturing Co Ltd 0.98%
ASML Holding NV 0.95%
Taiwan Semiconductor Manufacturing Co Ltd ADR 0.91%
Roche Holding AG 0.91%
Toyota Motor Corp 0.75%
LVMH Moet Hennessy Louis Vuitton SE 0.68%
Novartis AG 0.67%

VEU’s Top Holdings are Tencent Holdings Ltd, Alibaba Group Holding Ltd Ordinary Shares, Nestle SA, Taiwan Semiconductor Manufacturing Co Ltd, and ASML Holding NV at 1.57%, 1.4%, 1.22%, 0.98%, and 0.95%.

Taiwan Semiconductor Manufacturing Co Ltd ADR (0.91%), Roche Holding AG (0.91%), and Toyota Motor Corp (0.75%) have a slightly smaller but still significant weight. LVMH Moet Hennessy Louis Vuitton SE and Novartis AG are also represented in the VEU’s holdings at 0.68% and 0.67%.

Risk Analysis

VYM VEU
Mean Return 1.04 0.56
R-squared 88.88 98.44
Std. Deviation 12.69 15.08
Alpha -0.7 0.28
Beta 0.88 0.99
Sharpe Ratio 0.93 0.4
Treynor Ratio 13.24 5.12

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

The Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) has a R-squared of 98.44 with a Mean Return of 0.56 and a Standard Deviation of 15.08. Its Alpha is 0.28 while VEU’s Sharpe Ratio is 0.4. Furthermore, the fund has a Treynor Ratio of 5.12 and a Beta of 0.99.

VYM’s Mean Return is 0.48 points higher than that of VEU and its R-squared is 9.56 points lower. With a Standard Deviation of 12.69, VYM is slightly less volatile than VEU. The Alpha and Beta of VYM are 0.98 points lower and 0.11 points lower than VEU’s Alpha and Beta.

Performance

Annual Returns

VYM vs. VEU - Annual Returns

Year VYM VEU
2020 1.14% 11.39%
2019 24.2% 21.63%
2018 -5.87% -13.97%
2017 16.42% 27.27%
2016 16.87% 4.77%
2015 0.33% -4.67%
2014 13.47% -4.05%
2013 30.26% 14.5%
2012 12.68% 18.55%
2011 10.5% -14.25%
2010 14.17% 11.85%

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 2017 was the strongest year for VEU, returning 27.27% on an annual basis. The poorest year for VEU in the last ten years was 2011, with a yield of -14.25%. Most years the Vanguard FTSE All-World ex-US Index Fund ETF Shares has given investors modest returns, such as in 2016, 2020, and 2010, when gains were 4.77%, 11.39%, and 11.85% respectively.

Portfolio Growth

VYM vs. VEU - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $33,914 12.20%
VEU $10,000 $18,507 6.64%

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 VEU, the end total would have been $18,507. This equates to a $8,507 profit over 11 years and a compound annual growth rate (CAGR) of 6.64%.

VYM’s CAGR is 5.56 percentage points higher than that of VEU and as a result, would have yielded $15,407 more on a $10,000 investment. Thus, VYM outperformed VEU by 5.56% annually.


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