If You'd Invested $300 in the Vanguard High Dividend Yield ETF 5 Years Ago, Here's How Much You'd Have Today | The Motley Fool (2024)
The Vanguard High Dividend Yield ETF is a great choice for many investors, but there's one downside you should also know.
The Vanguard High Dividend Yield ETF(VYM 0.54%) has proven a profitable investment over the years. If you had invested $300 into the ETF five years ago, you'd have around $466 today -- a 55.6% return. But before you jump in, there are three things you should know about this fund.
3 things to know about Vanguard's High Dividend Yield ETF
One of the biggest determinants of a fund's performance is its expense ratio. That's how much a company charges you per year for holding the ETF. The Vanguard High Dividend Yield ETF has an expense ratio of just 0.06%. Vanguard estimates the expense ratio of similar funds to be around 0.9%, so this ETF is quite a bargain when it comes to expenses.
Vanguard's High Dividend Yield ETF also demonstrates less volatility than many market indices. Its beta versus the Dow Jones U.S. Total Stock Market Index, for instance, is just 0.74. That means that if the stock market were to fall by 1%, this ETF would be expected to fall by just 0.74%.
Beta works both ways, however. And that brings us to the final thing to know about Vanguard's High Dividend Yield ETF: it typically underperforms major market indices during a bull market. While this ETF rose in value by 55.6% over the last five years, the S&P 500 rose 86.6% in value over the same time period. That's quite a difference.
In summary, the Vanguard High Dividend Yield ETF is a great option for more income-oriented investors looking for a cost-effective way to invest in high yield, low volatility stocks. But if you're looking for maximum upside, a simple S&P 500 index fund is likely the superior choice.
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.
A $300 investment into this ETF five years ago would be worth around $466 today. This fund is a great choice for investors looking for high dividends and lower volatility.
Based on 553 Wall Street analysts offering 12 month price targets to VYM holdings in the last 3 months. The average price target is $136.52 with a high forecast of $156.90 and a low forecast of $116.26. The average price target represents a 10.92% change from the last price of $123.08.
In general, such funds are appropriate for investors who have a long-term investment horizon (ten years or longer), who are seeking growth in capital as a primary objective, and who are prepared to endure the sharp and sometimes prolonged declines in share prices that occur from time to time in the stock market.
As of June 2024, the Vanguard Mega Cap Growth Index provided the highest one-year return rate. The Vanguard Russell 1000 Growth Index Fund ranked second having a one-year return rate of 36.3 percent.
What Is a Good Dividend Yield? Yields from 2% to 6% are generally considered to be a good dividend yield, but there are plenty of factors to consider when deciding if a stock's yield makes it a good investment. Your own investment goals should also play a big role in deciding what a good dividend yield is for you.
Dividends and interest payments from ETFs are taxed like income from the underlying stocks or bonds they hold. For U.S. taxpayers, this income needs to be reported on form 1099-DIV. 18 If you profit by selling shares in an ETF, that is taxed, like when you sell stocks or bonds.
While it depends on your financial situation and existing portfolio, Vanguard ETFs could make sound investments for most individuals, especially if you plan to invest over a long period.
As of August 2024, in the previous 30 Years, the Vanguard High Dividend Yield (VYM) ETF obtained a 9.90% compound annual return, with a 14.58% standard deviation.
Introduction: My name is Rueben Jacobs, I am a cooperative, beautiful, kind, comfortable, glamorous, open, magnificent person who loves writing and wants to share my knowledge and understanding with you.
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