Launched on 11/10/2006, the Vanguard High Dividend Yield Index Fund ETF Shares (VYM) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Vanguard. VYM has been able to amass assets over $80.41 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. VYM seeks to match the performance of the FTSE High Dividend Yield Index before fees and expenses.
The FTSE High Dividend Yield Index which is consists of common stocks of companies that pay dividends that generally are higher than average.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.04%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.26%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For VYM, it has heaviest allocation in the Financials sector --about 21.2% of the portfolio --while Information Technology and Healthcare round out the top three.
When you look at individual holdings, Broadcom Inc (AVGO) accounts for about 6.27% of the fund's total assets, followed by Jpmorgan Chase & Co (JPM) and Exxon Mobil Corp (XOM).
Performance and Risk
The ETF has added roughly 13.36% and is up roughly 21.94% so far this year and in the past one year (as of 07/14/2026), respectively. VYM has traded between $132.90 and $161.17 during this last 52-week period.
The fund has a beta of 0.73 and standard deviation of 12.27% for the trailing three-year period, which makes VYM a medium risk choice in this particular space. With about 620 holdings, it effectively diversifies company-specific risk .
Alternatives
Vanguard High Dividend Yield Index Fund ETF Shares is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value Index Fund ETF Shares (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $98.86 billion in assets, Vanguard Value Index Fund ETF Shares has $187.23 billion. SCHD has an expense ratio of 0.06% and VTV changes 0.03%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value
Bottom Line
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Vanguard High Dividend Yield Index Fund ETF Shares (VYM): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).