The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and VTIP is a Vanguard Inflation-Protected Bond fund. So, what’s the difference between VYM and VTIP? And which fund is better?
The expense ratio of VYM is 0.01 percentage points higher than VTIP’s (0.06% vs. 0.05%). VYM also has a high exposure to the financial services sector while VTIP is mostly comprised of AAA bonds. Overall, VYM has provided higher returns than VTIP over the past ten years.
In this article, we’ll compare VYM vs. VTIP. We’ll look at industry exposure and performance, as well as at their fund composition and risk metrics. Moreover, I’ll also discuss VYM’s and VTIP’s holdings, portfolio growth, and annual returns and examine how these affect their overall returns.
|Name||Vanguard High Dividend Yield Index Fund ETF Shares||Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares|
|Category||Large Value||Inflation-Protected Bond|
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 Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) is a Inflation-Protected Bond fund that is issued by Vanguard. It currently has 50.67B total assets under management and has yielded an average annual return of 1.79% over the past 10 years. The fund has a dividend yield of 1.35% with an expense ratio of 0.05%.
VYM’s dividend yield is 1.44% higher than that of VTIP (2.79% vs. 1.35%). Also, VYM yielded on average 10.40% more per year over the past decade (12.20% vs. 1.79%). The expense ratio of VYM is 0.01 percentage points higher than VTIP’s (0.06% vs. 0.05%).
|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%|
|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%.
|VTIP Bond Sectors||Weight|
VTIP’s Top Bond Sectors are ratings of AAA, Others, Below B, B, and BB at 99.87%, 0.13%, 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.
The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Treynor Ratio of 13.24 with a R-squared of 88.88 and a Sharpe Ratio of 0.93. Its Mean Return is 1.04 while VYM’s Beta is 0.88. Furthermore, the fund has a Alpha of -0.7 and a Standard Deviation of 12.69.
The Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) has a Mean Return of 0 with a Sharpe Ratio of 0 and a Alpha of 0. Its R-squared is 0 while VTIP’s Beta is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Standard Deviation of 0.
VYM’s Mean Return is 1.04 points higher than that of VTIP and its R-squared is 88.88 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than VTIP. The Alpha and Beta of VYM are 0.70 points lower and 0.88 points higher than VTIP’s Alpha and Beta.
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 2020 was the strongest year for VTIP, returning 4.97% on an annual basis. The poorest year for VTIP in the last ten years was 2013, with a yield of -1.55%. Most years the Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares has given investors modest returns, such as in 2011, 2010, and 2018, when gains were 0.0%, 0.0%, and 0.54% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VYM would have resulted in a final balance of $18,315. This is a profit of $8,315 over 7 years and amounts to a compound annual growth rate (CAGR) of 12.20%.
With a $10,000 investment in VTIP, the end total would have been $11,305. This equates to a $1,305 profit over 7 years and a compound annual growth rate (CAGR) of 1.79%.
VYM’s CAGR is 10.40 percentage points higher than that of VTIP and as a result, would have yielded $7,010 more on a $10,000 investment. Thus, VYM outperformed VTIP by 10.40% annually.
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