I’m going to make an exception today. And we’ll talk about one of my favorite investments.
One of the best exchange-traded funds with high payouts is this investing option.
It’s a great option for both novice and seasoned investors.
The Vanguard High Dividend Yield ETF is the name of the fund.
The ticker symbol for this ETF is VYM, and it trades on the New York Stock Exchange (NYSE) (NYSEARCA: VYM).
VYM is a fantastic solution if you don’t want to buy specific dividend stocks.
Definition Of An ETF
Let’s begin with the fundamentals. I’ll outline Investopedia’s description of an ETF…
An exchange-traded fund (ETF) is a group of securities, such as stocks, that track an index.
Because it is exchanged on an exchange like a stock, an ETF is termed an exchange-traded fund. As shares are purchased and sold on the market, the price of an ETF’s shares will fluctuate during the trading day.
To buy shares in an ETF, you’ll need a brokerage account.
Webull, an online platform, is a great choice.
They’re giving you free stock when you sign up for a limited period.
It’s as if you’ve been given free money.
Open-end mutual funds are similar to exchange-traded funds (ETFs).
They’re also a group of financial instruments.
They do, however, only trade once a day, after the markets have closed.
ETF Further Explained
You obtain immediate ownership of numerous dividend stocks rather than just one by putting a little deposit in your brokerage account.
As a result, VYM delivers immediate diversification.
One of the benefits of investing in Vanguard ETFs is this. It’s also one of the most significant distinctions between buying a single stock and an ETF like VYM.
VYM or vig: which is better?
Neither of these will be the superior option for all investors, as is always the case in the world of investing. After all, each investor has his or her unique set of objectives, financial resources, investing style, and time horizon.
There is no such thing as a one-size-fits-all solution, but there are a few things to keep in mind while deciding between these two great dividend funds.
You Should Invest in the VIG Fund If…
- You want to make money, but the value of your investment is more important. The VIG fund pays out a decent amount of money, but it’s not nearly as much as VYM. The difference is made up in the long run by the returns. While the price increase of the VIG and VYM funds has been similar, the VIG fund has outpaced the VYM fund over time.
- You’re looking for a way to make money by investing in the stock market. Growth investing is a common investment strategy, and combining it with income has many advantages. Because the fund concentrates on firms that have regularly increasing dividends, the bulk of the equities it buys are known for not only dividend growth, but also sales and profits growth.
- You’d like to lower your drawdown risk. While both funds have had equal performance over the years, when looking at the charts for each, the VIG fund appears to be the more stable alternative when corrections or bear markets occur. This is the fund to choose if you want to reduce your drawdown risk.
You Should Invest in the VYM Fund If…
- Your primary goal is to make money. The fact that the VYM fund generates higher levels of revenue than the other two funds is undeniable. Dividend yields on the fund have nearly doubled over the last five years, compared to what you’d expect from VIG.
- Increased Drawdown Risk isn’t a problem for you. As previously stated, the VYM fund has had greater drawdowns than the VIG fund during market corrections or bear markets. Some investors with shorter time horizons who don’t have the ability to recover from substantial losses may be put off by this.
Both Are Great If…
Most investors will benefit from a combination of both strategies. Both of these ETFs are excellent choices if you:
- You’re looking for a lot of variety. One of the greatest methods to safeguard your portfolio against major losses is to diversify your investments among a wide range of stocks, industries, and market capitalization. If one stock or sector in your portfolio takes a dive, the stability of your other assets will help to reduce your losses.
- You’d like to be exposed to growth while also earning a good living. The VYM fund is the obvious choice for those looking for income, while the VIG fund is the obvious choice for those looking for growth. If you want exposure to both, though, combining the two funds is a fantastic way to go.
Is VYM superior to SPHD?
Here’s a look at the performance of SPHD and VYM, two mutual funds, dating back to SPHD’s creation in 2012:
SPHD and VYM were almost identical until the March 2020 crash, when SPHD plummeted farther and took longer to recover than VYM. SPHD had a negative return of -10.35 percent in 2020, while VYM had a positive return of 1.14 percent.
VYM has beaten SPHD over the long term, despite having a lower volatility of around 10% and a smaller maximum drawdown. In five of the last nine years, VYM has outperformed SPHD. A basket of low-volatility stocks, as with SPLV, does not always imply that the basket as a whole has low-volatility.
The market correlation I noted earlier is also visible: 0.83 for SPHD and 0.94 for VYM.
VYM or Schd: which is better?
- Schwab’s SCHD and Vanguard’s VYM are two prominent dividend-yield-focused ETFs, respectively.
- Both are extremely popular and have a sizable AUM, but VYM has a tiny lead over SCHD.
- SCHD uses profitability screening to find high-quality firms with a long-term dividend.
- VYM is made up of equities with higher-than-average dividend yields, excluding REITs. It is unconcerned with the quality of the product.
- Since its start in 2011, SCHD has delivered a better return than VYM while maintaining a similar level of volatility.
- SCHD, as one might assume, has a substantially higher exposure to the Profitability risk factor.
- Dividend investment is mostly based on the factors of Value, Profitability, and Investment, with some naive exposure to the others.
Which is better, Voo or VYM?
- The FTSE High Dividend Yield Index is tracked by VYM. The S&P 500 Index is followed by VOO. The CRSP US Total Market Index is followed by VTI.
- As a result, VYM is primarily comprised of large-cap dividend stocks in the United States (all Value, no Growth), VOO is comprised of large-cap stocks in the United States (both Growth and Value), and VTI is comprised of VOO plus small- and mid-cap firms.
- Since VYM’s launch in 2006, VOO and VTI have consistently outperformed VYM. To be fair, the Value premium has suffered a lot over that time. VTI and VOO have had roughly equal historical performance.
- VYM is probably not a good choice for a core holding in a well-diversified portfolio.
QQQ or VGT: which is better?
VGT, which has a 1.22 percent dividend yield, is an ETF to consider if you want a larger dividend income. With a 0.74 percent dividend yield, QQQ is roughly half of that. Because VGT has a greater dividend yield, you will most likely receive more income at the end of the year.
VOO or VTI: which is better?
- The two most popular U.S. stock market ETFs are VOO and VTI. Both are Vanguard products.
- As a result, VOO only contains large-cap stocks, whereas VTI includes both small- and mid-cap stocks.
- As a result, VTI has been slightly more volatile than VOO, which is to be expected.
- We would expect VTI to outperform VOO over the long term since it contains small- and mid-caps, which have historically outperformed large caps due to the Size factor premium.
- VTI has around 3,500 holdings, whilst VOO has about 500. VTI can be regarded more diversified.