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chang
Contributor ○○

VIG vs. VYM

I bought both of these in an IRA I manage several years ago... I forgot exactly when. As it happens, my cost basis for both of them is very close to one another at around $45/share.

Both have done well, but VIG has done better, as can be seen by the respective NAVs today.

Given growth’s long run leading value and various signs that value is perking up, I am considering selling the VIG and moving it all into VYM.

Make sense?

As an aside, can I sell one ETF and purchase another ETF with the proceeds immediately? IRAs often have peculiar restrictions involving  buying, and of course being an IRA I don’t have margin. It’s at Fido, if that helps.

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71 Replies
yogibearbull
Contributor ○○○

Re: VIG vs. VYM

Classic dilemma for div-growth VIG vs current-div VYM. Low rates favor growth over value. Income may be more valuable in T-IRA, growth in R-IRA.

ETFs settle T+2. So, entering separate sell & buy orders for ETFs on the same day should be acceptable at most brokers [Schwab, etc]. A warning may be produced - ignore it. Fidelity can be more restrictive and some posters have indicated that it can be fine if after Sell, Buy follows for 80-90% of Sell.

There is no problem at all if Sell is for OEF [T+1] and Buy is for ETF [T+2], but reverse is problematic if there isn't enough cash in the account.

YBB
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chang
Contributor ○○

Re: VIG vs. VYM

Thanks Yogi. Yeah I think Fido will cap me at 90%. Worst case I can complete it over two days.
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Win1177
Participant ○○

Re: VIG vs. VYM

Although I am a classic “value tilt” investor, I question the wisdom of selling ALL your growth position and going “all in” on Value. That’s a pretty big bet! I would personally consider maybe 2/3 Value, 1/3 growth instead?

In our accounts, we have about a 60% value, 40% growth allocation. Our portfolio’s P/E, P/cash flow are both a little lower than the market, and our dividend yield runs a little higher than the market indexes. This seems to be a little “protective” during equity sell offs, like 2008-2009. But I don’t think I would ever go 100% value, or any other “all in” bet. 

Win
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chang
Contributor ○○

Re: VIG vs. VYM

Win - it’s nothing as serious as that. This is only one account of many; also, the individual involved has a much larger VIG holding in a taxable account. Even after shifting VIG -> VYM in the IRA, the ratio of VIG:VYM will still be 4:1 !!

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Win1177
Participant ○○

Re: VIG vs. VYM

Chang, 

Didn't think so. But, I'm always cautious when someone says they're going "all in" on something. Having been "burned " a few times in the past when I've done that, I always try to stay relatively well diversified, even if I have a feeling that the market is "changing directions" (rates moving up/ down, change from growth to value, etc.). Keeps my "animal instincts" in check!

Win
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chang
Contributor ○○

Re: VIG vs. VYM

Done. (Macbeth, Act 1, Scene 7.)

Yogi - there were no restrictions. That 90% thing must apply to selling OEFs (whose closing NAV is obviously unknown) and buying something else simultaneously. There was no problem selling an ETF and buying another one immediately.
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NoFriends1
Explorer ○○○

Re: VIG vs. VYM

Consider going to vanguard advisors and hit compare funds. Run both side-by-side and then make your choice.

I would consider possessing both.

After comparing holdings, and reviewing their respective style boxes, they don't appear to be mutual exclusive and could compare nicely with each other in any percentage combination that meets your personal goals.

Signed,

NoFriends1

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Eumenes
Follower ○○

Re: VIG vs. VYM

seems like there will likely be an economic slowdown (recession?) in the next year or two.  I would lean towards positions that should hold up better in a slowing economy


@chang wrote:

I bought both of these in an IRA I manage several years ago... I forgot exactly when. As it happens, my cost basis for both of them is very close to one another at around $45/share.

Both have done well, but VIG has done better, as can be seen by the respective NAVs today.

Given growth’s long run leading value and various signs that value is perking up, I am considering selling the VIG and moving it all into VYM.

Make sense?

As an aside, can I sell one ETF and purchase another ETF with the proceeds immediately? IRAs often have peculiar restrictions involving  buying, and of course being an IRA I don’t have margin. It’s at Fido, if that helps.


 

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rhythmmethod
Explorer ○○○

Re: VIG vs. VYM

I was holding both a while back and traded VIG for VYM. I hold fewer funds than you bc I have fewer funds😅. I consider JENSX to be my high quality LC and it’s been working or me. I like index for value. I’m guessing that in your case it’s not that big a deal either way.  🤷‍♂️ 

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Fishingrod
Explorer ○○

Re: VIG vs. VYM

I carry both VIG and VYM at about 5% each of portfolio. Also VDC consumer staples.

I also have VDIGX active which is similiar to VIG at about 9% of portfolio.

If you need the income I could see exchanging the growth for value.

If not then I think that the prospects for more total return lies with VIG because of it's growth component and it's quality filter.

I still think that the total return of both going forward are difficult to guess at.

Value has only led now for less than a month and only a rough 1.5% difference.

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rila3400
Participant ○○○

Re: VIG vs. VYM

 

M* recently analyzed Vanguard High Dividend Yield Index Fund.
While VIG and VYM are both good funds, I prefer Vanguard's active counterparts: VDIGX and VEIRX.

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chang
Contributor ○○

Re: VIG vs. VYM

@rhythmmethod wrote:

I was holding both a while back and traded VIG for VYM. I hold fewer funds than you bc I have fewer funds😅. I consider JENSX to be my high quality LC and it’s been working or me. I like index for value. I’m guessing that in your case it’s not that big a deal either way.  🤷‍♂️ 


I’m glad I’m in distinguished company. Incidentally I’ve owned JENIX since 2008. It’s the perfect LCG fund for the FAANG-averse, and for those who like a disciplined strategy. 

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Gary1952
Participant ○○○

Re: VIG vs. VYM

I considered changing to VYM from VIG for the yield but I couldn't justify it based on a Backtest. VYM had poorer metrics than VIG for 5 year and 10 year runs. Maybe you are onto something with value surging.

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ElLobo
Participant ○○

Re: VIG vs. VYM


@chang wrote:

I bought both of these in an IRA I manage several years ago... I forgot exactly when. As it happens, my cost basis for both of them is very close to one another at around $45/share.

Both have done well, but VIG has done better, as can be seen by the respective NAVs today.

Given growth’s long run leading value and various signs that value is perking up, I am considering selling the VIG and moving it all into VYM.

Make sense?

As an aside, can I sell one ETF and purchase another ETF with the proceeds immediately? IRAs often have peculiar restrictions involving  buying, and of course being an IRA I don’t have margin. It’s at Fido, if that helps.


I wouldn't spend too much time doing any DD on either.  VIG includes 184 stocks, VYM 418.  I don't know how much overlap there is between the two, nor how certain characteristics, like average P/E, P/B, and so forth, compare.  Even if you did do a complete, detailed comparison between the two, what would that tell you, and how would you evaluate, going forward, which of the two would be the better choice?  Comments, like growth over value reminds me of Yogi Berra, who famously said, "Good pitching beats good hitting, and vice versa!"

I would suggest, as an alternative, you examine the actual distribution history for the two funds.  Yahoo! provides the historical distribution history for both.  Whenever you download that history into EXCEL, you find, as expected, that, over time, VYM distributed more cash than VIG.  However, you will also find something else that is interesting, specifically, if you add a linear trendline to each distribution history, you find that the slope of the VYM distribution trendline is steeper than that of VIG, which means that, over their history, VYM had a slightly higher distribution growth rate than VIG!

So, from the perspective of a divey growth investor, the obvious choice, based upon the historical distribution history of both funds, would be, unquestionably, VYM, given it currently yields more, at 3.16%, than VIG, which is at 1.77%, and had a higher distribution growth rate as well.  In other words, two in the hand is worth one in the bush, so to speak!

The argument against doing so is from a fund NAV growth, hence TR basis, as you have identified!

So, ifn you believe that past NAV growth is more stable and predictable for the future, than past distribution growth, go with VIG.  Otherwise, VYM!

For kicks, there is a third option, SDY, which is the SPDR S&P Dividend ETF.  It currently yields 2.45% and has been around as long as VIG and VYM.  This index tracks the 20 year divey aristrocrats within the S&P1500 index, and contains about 110 stocks.  It compares more closely with VYM, but is tilted more towards small value, which, according to Fama French, should result in higher returns, going forward.

For kicks, here is the PV analysis for VIG, VYM, and SDY.  Pay particular attention to the yearly distribution cash flow from each, given at the bottom of the page.  Link

(For those of you thinking outside the box, I use the 2X leveraged version of SDY, SDYL, from UBS.  It returns twice that of SDY but distributes more than 3 times as much cash.  The current yield of SDYL is 5.36%.  Here is the Yahoo! NAV chart for SDYL, compared to both VIG and VYN.)

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chang
Contributor ○○

Re: VIG vs. VYM


@Gary1952 wrote:

I considered changing to VYM from VIG for the yield but I couldn't justify it based on a Backtest. VYM had poorer metrics than VIG for 5 year and 10 year runs. Maybe you are onto something with value surging.


There is no disputing performance over the last 10 years. But value does lead eventually. I might be early, but I’ve gotten my fair share from growth exposure. Now I’m leaving toward value. new money is going into MCV.

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rhythmmethod
Explorer ○○○

Re: VIG vs. VYM


@chang wrote:
@rhythmmethod wrote:

I was holding both a while back and traded VIG for VYM. I hold fewer funds than you bc I have fewer funds😅. I consider JENSX to be my high quality LC and it’s been working or me. I like index for value. I’m guessing that in your case it’s not that big a deal either way.  🤷‍♂️ 


I’m glad I’m in distinguished company. Incidentally I’ve owned JENIX since 2008. It’s the perfect LCG fund for the FAANG-averse, and for those who like a disciplined strategy. 


The only twist is that I also hold AAPL and AMZN that I buy on dips and sell when I think overvalued (like AAPL currently). If you communicate with FD pass my regards.

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Juris2
Explorer ○○○

Re: VIG vs. VYM

I have a roughly 3 to 2 ratio of VYM/VIG in my brokerage account. I see no reason to change that. My PIMIX holding is about 2/3 of the sum of my VIG + VYM holdings.

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FatKat
Participant ○○

Re: VIG vs. VYM

VIG (VDADX) is not so much a growth fund, as it is a dividend growth fund. I hold some of each over at Vanguard and will continue to hold both. I have some of my S&P 500 stocks divided up between VIGAX, the growth side, and VVAIX, the value side, and have increased VVIAX recently.  The VYM ETF hold about 400 stocks, high on energy and has a value tilt, as one would expect given its large dividend. I can see boosting VYM, but I would hang on to some of VIG for now.

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FatKat
Participant ○○

Re: VIG vs. VYM


@chang wrote:
@rhythmmethod wrote:

I was holding both a while back and traded VIG for VYM. I hold fewer funds than you bc I have fewer funds😅. I consider JENSX to be my high quality LC and it’s been working or me. I like index for value. I’m guessing that in your case it’s not that big a deal either way.  🤷‍♂️ 


I’m glad I’m in distinguished company. Incidentally I’ve owned JENIX since 2008. It’s the perfect LCG fund for the FAANG-averse, and for those who like a disciplined strategy. 


That is a good fund, and have held it in the past, the investor shares JENSX. It has a higher expense, but does complement VDIGX as having better downside protection.

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