VYM vs. SCHD: Which ETF is Better For You?
VYM and SCHD, both high dividend yield ETFs, are popular for their passive income generation, making them quite attractive to many investors.
However, there are some key differences you should consider before picking one, so let’s compare them!
SCHD vs. VYM Overview
Both ETFs offer substantial diversification across a range of stocks and sectors, aligning with the investment principle of not putting all your eggs in one basket.
The Vanguard High Dividend Yield ETF [VYM] replicates the performance of the FTSE High Dividend Yield Index and was launched back in November 2006.
On the other hand, Charles Schwab’s SCHD mirrors the Dow Jones U.S. Dividend 100 Index since its launch in October 2011.
An interesting fact about SCHD: It focuses solely on U.S. domestic companies with a commendable record of consistent dividend payouts.
Expense Ratio Comparison
Both VYM and SCHD offer relatively low-cost solutions with an equal expense ratio of 0.06%.
This low expense ratio places these ETFs among some of the cheapest in the market.
Dividend Yield Comparison
As high dividend yield ETFs, both VYM and SCHD have above-average trailing twelve-month (TTM) yields.
However, historically, SCHD has experienced a higher TTM yield of around 3.58% compared to VYM’s 3.09% yield.
Holdings Comparison
A dive into the sector allocation of these ETFs illuminates some key differences.
SCHD leans into industrials (around 17.51%) and healthcare (16.81%), while technology gets around a 12% allocation. SCHD hardly holds any utilities, while VYM has a 7% allocation as well.
On the flip side, VYM favors financials with around a 20% allocation. Industries such as healthcare, industrials, utilities, and basic materials also find representation in VYM’s allocation, albeit with lower percentages.
SCHD stands out when it comes to maintaining a more concentrated portfolio. With only about 104 holdings compared to VYM’s rich basket of around 450 holdings, SCHD places bigger bets on its top-performing picks.
Performance Comparison
Historically, SCHD has outperformed VYM in terms of total return.
In a period of speedy economic growth, SCHD, with its slightly higher exposure to growth-oriented sectors like technology, is expected to outpace its counterpart.
However, VYM possessing a more defensive posture with higher exposure to sectors like utilities and basic materials, proves to be more resilient during periods of slow growth or economic recession.
Which is Better for you?
SCHD seems particularly suitable for investors with a higher risk tolerance, eyeing substantial capital growth during periods of economic uplift.
Conversely, if you cherish stability and are looking for an all-weather fund, one that would not only withstand market downturns but also yield consistent dividends, then VYM might just be the better option for you.
Remember, this guidance should serve to supplement your own research and due diligence in finding your best fit. Happy investing!
Frequently Asked Questions
Is VYM a good retirement investment?
Vanguard High Dividend Yield ETF, or VYM, is actually a popular choice among retirees because of its capacity to generate consistent dividends.
It’s a more defensive ETF with a considerable focus on utilities and basic materials sectors that fare relatively well during periods of slower growth or recession, making it viable for a retirement investment– especially for those seeking more stability.
