Vanguard High Dividend Yield ETF: A Defensive Play with Steady Growth and Income

The Vanguard High Dividend Yield ETF (VYM) is a well-diversified ETF that tracks the FTSE High Dividend Yield Index, with 580 stocks, including Broadcom, JPMorgan Chase, ExxonMobil, and Johnson & Johnson. It offers a 30-day SEC yield of 2.6%, is a low-cost option with an expense ratio of 0.06%, and is a defensive play with only 12% of its portfolio allocated to tech stocks. It may attract attention as interest rates decline and is a good option for investors who want instant exposure to a well-diversified portfolio without having to do too much homework.

The Vanguard High Dividend Yield ETF (VYM) is a well-diversified ETF that tracks the FTSE High Dividend Yield Index, comprising 580 stocks. Key holdings include Broadcom, JPMorgan Chase, ExxonMobil, and Johnson & Johnson. With a 30-day SEC yield of 2.6% and an expense ratio of 0.06%, VYM offers a balanced blend of income and growth. This ETF is particularly appealing as a defensive play, with only 12% of its portfolio allocated to tech stocks, providing diversification across various sectors [1].

VYM's low fee structure is a significant advantage, with an expense ratio of 0.06%, which is much lower than the average expense ratio of 0.14% for passively managed index ETFs. This makes it a cost-effective option for investors seeking a well-diversified portfolio without the need for extensive research or due diligence [1].

The ETF's defensive nature is further highlighted by its low exposure to tech stocks, which currently account for over a third of the S&P 500's market cap. As the S&P 500 looks historically expensive at 30 times earnings and faces potential pullbacks due to tariffs and geopolitical conflicts, VYM's diversification could make it a more stable investment [1].

Moreover, VYM's exclusion of real estate investment trusts (REITs) adds to its reliability as a long-term investment. REITs, while offering high yields, are heavily exposed to interest rate swings, which can erode their occupancy rates, profits, and dividends. By avoiding REITs, VYM becomes a more resilient choice [1].

As interest rates decline, VYM is expected to attract more investors. The 10-Year Treasury's yield was below 2% in the first half of 2022, and if inflation is reined in, rates could return to these levels or lower. When this happens, funds like VYM, which offer a balanced blend of growth, income, and stability for a low fee, should gain significant attention [1].

Before investing, it's worth considering the Motley Fool Stock Advisor's analysis, which did not include VYM in its top 10 picks. However, the team's past performance, with returns of 1,049% compared to the S&P 500's 185%, underscores the potential for significant growth in individual stocks [2].

In conclusion, the Vanguard High Dividend Yield ETF (VYM) is a compelling option for investors seeking a defensive, low-cost, and well-diversified portfolio. Its focus on companies growing their earnings and dividends, along with its low fee structure and defensive play, makes it an attractive choice in the current market environment.

References:
[1] https://www.nasdaq.com/articles/why-vanguard-high-dividend-yield-etf-vym-could-be-etf-own-2025
[2] https://finance.yahoo.com/news/why-vanguard-high-dividend-yield-124500149.html