Vanguard ETFs: VIG vs VYM Comparison Guide

If you’re looking to add a dividend ETF to your portfolio, the popular Vanguard ETFs, VIG and VYM, are likely to make your shortlist for consideration. While both of these funds focus on dividend stocks, there are some key differences to understand before buying shares of either ETF. 

In our comparison guide, we provide all the key details you need to know about VIG and VYM, including performance, yield and expense ratios, to determine if either of these dividend ETFs will make a good addition to your portfolio. 

Vanguard ETFs: VIG vs VYM

VIG and VYM are exchange-traded funds offered by Vanguard. Both funds track the performance of an index that includes U.S. companies that pay dividends. However, the benchmarks are not the same. VIG invests in companies with a consistent history of dividend growth, while VYM invests in companies with higher-than-average dividend yields. 

What Is VIG? 

The Vanguard Dividend Appreciation ETF (VIG) tracks the performance of the S&P U.S. Dividend Growers Index, which is made up of U.S. companies that have a history of increasing their dividends for at least 10 consecutive years. The largest dividend ETF, VIG focuses on companies with a consistent history of dividend growth, which can provide reliable income for investors. 

What Is VYM? 

The Vanguard High Dividend Yield ETF (VYM) tracks the performance of the FTSE High Dividend Yield Index, which includes U.S. companies with above-average dividend yields. The largest high dividend yield ETF, VYM invests in companies that have higher dividend yields than the overall market, but these companies may not have a history of consistent dividend growth. 

VIG vs VYM: Performance 

When it comes to performance, VIG wins the battle in the long run with a 9.93% annualized 10-year return compared to VYM's 8.60% return. In the short term, the performance comparison is mixed as VYM underperforms VIG over the past year while VYM beats VIG for the three-year return. VYM's short-term performance has likely been harmed by investors preferring Treasuries, which have recently provided good yields and lower risk.

For example, VYM's performance has been pulled down by it's higher allocation to utilities, which underperformed the market in 2023, whereas VIG has greater exposure to technology, an outperformer. 

VIG vs VYM: Side-by-Side Comparison 

Here are the key metrics for comparing VIG and VYM with data as of October 31, 2023: 

VIG vs VYM: Key Takeaways 

For a quick overview of the VIG versus VYM comparison, here are the key takeaways: 

• AUM: Although VIG is larger than VYM, both ETFs have assets under management in the billions, which makes them both large enough to provide sufficient liquidity for trading. Thus, neither has the edge here. 
• Expense ratio: VIG and VYM have the same low expense ratio of just 0.06, or $6 for every $10,000 invested. 
• Yield: VYM’s 30-day SEC yield of 3.40% beats that of VIG’s 1.97% yield.  
• Performance: Through October 31, 2023, VYM wins the three-year performance battle with an 11.48% return versus 8.82% for VIG. However, VIG wins in every other time period, both in the short term and in the long run. 

VIG vs VYM: The Differences 

Both ETFs can provide income and growth to investors, but VIG and VYM have different approaches to selecting the stocks in their portfolios. This fundamental difference leads to other differences, such as their holdings and performance.  

The main differences between VIG and VYM include: 

• Investment Objective: VIG seeks to track the performance of the S&P U.S. Dividend Growers Index, which includes companies with a record of increasing their dividends for at least 10 consecutive years. VYM, on the other hand, seeks to track the performance of the FTSE High Dividend Yield Index, which includes U.S. stocks with higher-than-average dividend yields. 
• Composition: VIG's holdings consist of companies with a consistent history of dividend growth, while VYM 's holdings include companies with high dividend yields. As a result, VIG's holdings tend to be more mature and stable, while VYM's holdings tend to be riskier and more volatile. 
• Sector Exposure: VIG has a more diversified sector exposure, with significant holdings in sectors such as consumer staples, healthcare and technology. VYM, on the other hand, has a higher exposure to sectors such as financials, energy and utilities. 
• Performance: Over the long term, VIG has delivered relatively stable returns, with a focus on dividend growth, while VYM has delivered higher yields but with more volatility. 

VIG vs VYM: The Similarities 

VIG and VYM are both Vanguard ETFs and they have some other similarities that investors need to know in addition to their differences. 

The main similarities between VIG and VYM include: 

• Income from dividends: Both ETFs invest in U.S. companies that pay dividends. This means that investors who hold shares of either VIG or VYM can potentially receive regular income from their investments. 
• Low expenses: Both ETFs have low expense ratios, which means investors pay relatively low fees to own shares of the fund. This can be an attractive feature for investors who want to keep their investment costs low. 
• Diversification: Both ETFs provide investors with exposure to a broad range of U.S. stocks. This diversification can help to reduce the risk of the portfolio and potentially increase returns over the long term. 

VIG vs VYM: Who Should Invest 

VIG is a suitable investment for investors who are looking for exposure to U.S. equities with a focus on dividend growth. VYM is a suitable investment for investors who are looking for exposure to U.S. equities with a focus on high dividend yields. 

Additionally, VIG may be suitable for investors who are seeking exposure to the U.S. stock market with a more diversified sector exposure. The ETF has significant holdings in sectors such as consumer staples, healthcare and technology, which can provide investors with exposure to different areas of the economy. 

Investors who are looking for income over the short term may find VYM appealing, as it focuses on companies with higher dividend yields. The ETF's holdings tend to offer a higher yield than the broader market, which can provide investors with regular income. Additionally, VYM may be suitable for investors who are seeking exposure to specific sectors such as financials, energy and utilities. 

VIG vs VYM: ETF Comparison Tool 

Investors can use etf.com’s ETF comparison tool and look at side-by-side data on any two ETFs in the entire investment universe. Simply enter ticker symbols, click the “Compare” button and you can compare current data, such as AUM, expenses, performance, holdings and more. For an example, here’s the comparison tool results of VIG versus VYM. 

Bottom Line 

VIG is focused on dividend growth and has a more diversified sector exposure, while VYM is focused on high dividend yields and has a higher concentration in certain sectors. The ultimate choice of investment between these two Vanguard ETFs depends on an investor’s goals, risk tolerance and portfolio strategy.