VTV vs. VYM: Which ETF is Right for Your Portfolio?

Lois Zaytsaw
Lois Zaytsaw Finance
9 Min Read

Are you looking for the ETF to best fit your investment portfolio? With hundreds of options available, deciding between VTV and VYM can be daunting. In this blog post, we’ll examine both exchange-traded funds in detail and compare their performance, fees, risk profile, and more to help you decide which one is right for your financial goals. By understanding the differences between these two funds, you’ll be able to determine which has greater potential returns while still maintaining an acceptable level of risk. Let’s explore!

Let’s Start With VTV:

Vanguard Value Index Fund, also known as VTV, is an exchange-traded fund that exposes large-cap U.S. stocks with value characteristics. The fund invests in companies that have lower prices relative to earnings or book value and those that pay higher dividends. VTV aims to track the performance of the CRSP US Large Cap Value Index, which consists of stocks that meet certain value metrics. With a low expense ratio and a diversified portfolio, VTV may be a suitable choice for investors looking for an efficient and cost-effective way to access the value segment of the U.S. stock market.


  • Low Expense Ratio: With an expense ratio of 0.07%, VTV has one of the lowest fees among index mutual funds available in the market today. This significantly decreases your cost while increasing net returns over time. 
  • Minimal Tracking Error: As an index fund, VTV seeks to replicate its benchmark’s performance as closely as possible – usually within a 0–2% range difference from its underlying index return – meaning it provides good tracking accuracy for investors when compared with active mutual funds or ETFs. 
  • Diversification Benefits: By investing in all 500 large-cap value stocks included in its benchmark, VTV enables investors to spread their risk across multiple asset classes, industries, and economies, providing them diversification benefits within sector preferences (e.g., healthcare & tech). 


  • Benchmark Risk Exposure: Given its passive nature, VTV is fully exposed to the risk associated with specific sectors or issues included in its underlying index, i.e., if there are losses due to any particular stock(s) or sector-related movements beyond what was anticipated by market analysts based on macroeconomic conditions at the time. Then these will affect your overall returns since you do not have an actively managed portfolio that can maneuver around such outside risks differently. That said, this exposure also means opportunities lost if outperforming securities exist outside this scope and you do not participate therein proportionately because, again, being a passive investor, your investment strategy remains constrained by whatever gets chosen by the fund managers responsible for selecting constituents according to prearranged parameters ahead of trading periods. 
  • Lower Returns Potential: Since it invests strictly within predetermined criteria established upfront (i.e., companies above traded at lower valuations), VTV may offer slightly lower returns than active managers managing portfolios designed specifically around certain high return strategies instead but still overall reasonably good enough given minimized costs associated.
vtv vs vym which etf is right for your portfolio 2

What About VYM? What Is It?

VYM, or Vanguard High Dividend Yield ETF, is an investment option that deserves to be on the radar of any prudent investor. It is an exchange-traded fund that tracks the performance of high dividend-yielding stocks in the United States. VYM aims to provide investors with regular dividend income while investing in a well-diversified portfolio of stocks. By investing in VYM, investors can access a diversified portfolio of high-quality U.S. dividend-paying stocks without picking individual stocks themselves. VYM is a low-cost investment option with expense ratios that are lower than the industry average, making it an attractive choice for investors seeking long-term capital appreciation and regular dividend income. Whether you’re new to investing or seeking to add an ETF to your portfolio, VYM is worth considering.


Low Expense Ratio: VYM’s expense ratio of 0.08% is much lower than most actively managed funds, making it a cost-effective way to gain exposure to the U.S. high dividend-yielding equity market without incurring additional fees associated with trades or active management fees.

Diversified Portfolio: The ETF includes over 400 stocks from various sectors in multiple industries, providing greater diversification than what could be achieved if one invested directly in individual stocks.

Passive Management: By tracking the FTSE High Dividend Yield Index, VYM eliminates the need for active management decisions and reduces potential associated risks.

Monthly Distributions: As it tracks an index of companies that pay out higher dividends annually, this ETF offers monthly distributions that can serve as an additional source of income.

Investment Flexibility: With lower account minimums and ease of liquidity when trading through any broker platform due to its status as an open-ended investment vehicle/exchange-traded fund/mutual fund. 


Lack of Tax Efficiency: Because most dividends are treated as ordinary taxable income rather than qualified dividends, which receive preferential tax treatment under current federal laws, this would make VYM less favorable from a tax perspective compared to other non-dividend paying investments such as growth stocks.

Higher Volatility Risk: Companies that pay higher dividends tend to be more mature companies which bring slower revenue growth profiles—as these types of firms usually offer higher yield—which exposes investors’ invested capital to potential volatility when market sentiment shifts negatively towards these kinds of firms.

Limited Upside Capital Appreciation Potential: Due mainly due limited upside capital appreciation potential relative especially given no dedicated effort aimed at stock selection by either a computer program or professional manager means there is unlikely to be significant capital gains opportunities within the current portfolio construction process.

What Are the Differences Between VTV vs. VYM?

The primary difference between VTV and VYM is the type of investments they focus on. VTV is a broad-based index fund focusing primarily on large-cap stocks, while VYM takes a more focused approach, investing in companies with high dividend yields. While both funds can create diversified portfolios, investors looking for an income stream may find that VYM offers better returns. 

VTV has much lower annual expenses than other index funds, offering investors cost savings over time. On the other hand, because of its focus on dividend-paying stocks, there may be periods when the fund experiences higher volatility due to fluctuations in stock prices or shifts in industry trends. It’s essential to do your research and assess which strategy is right for you based on your investment goals and risk tolerance levels.


Overall, there is much to consider when deciding between VTV and VYM as part of your portfolio. Whichever route you take, you should consult an investment professional who can discuss the specific details with your account. Other options also exist beyond ETFs – looking into stocks and mutual funds for a higher level of control over your investments may be beneficial. No matter which vehicle you choose, the key is to assess your individual investment goals carefully to make a decision that best fits those objectives.

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Lois Zaytsaw
By Lois Zaytsaw Content Editor, Financial Writer
Meet Lois, a dynamic Crypto, Blockchain, and Finance Writer/Journalist based in the bustling metropolis of New York City. With a passion for technology and a keen understanding of finance, Lois has been covering the latest developments in the world of cryptocurrency and blockchain for several years. Her insightful articles have been featured in numerous leading publications, including The Wall Street Journal, Bloomberg, and CryptoBriefing. Lois' fascination with blockchain and cryptocurrency began during her time as a student at university, where she studied economics and computer science. She was drawn to the disruptive potential of blockchain technology to revolutionize the traditional financial industry, and since then, she has been following the latest trends and innovations in the space.
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