What is an exchange-traded fund (ETF) and how does it work?

An exchange-traded fund (ETF) is a basket of securities that trades on an exchange like a stock. It provides access to markets by holding shares or bonds from many companies. ETFs track indices, sectors, or asset classes and are bought and sold throughout the day at market prices. Unlike mutual funds, they offer intraday trading and generally have lower expense ratios. Investors gain diversification with a single transaction, though returns depend on the performance of underlying assets and market conditions. It is educational, not advice.

What does 'tracking' mean in ETF investing?

Tracking refers to how closely an ETF follows its benchmark index or target strategy. For example, VTI aims to reflect the total US stock market, while VYM focuses on high-dividend stocks. Differences arise from fees, dividends, sampling methods, or market fluctuations. Tracking is assessed over time rather than on a single day. An ETF may slightly deviate from its index due to operational costs or cash holdings, but over the long run, investors can expect returns to resemble the underlying strategy. It is educational, not advice.

Why do expense ratios matter for long-term investors?

Expense ratios measure annual costs of running an ETF, expressed as a percentage of assets. They reduce net returns regardless of performance. For instance, VTI has a 0.03% expense ratio, while VYM has 0.04%, a difference of 0.01 percentage points. Over time, even small differences compound, affecting investment growth. Lower costs make it easier for an ETF to track its intended market accurately. Investors should understand fee structures to anticipate how costs erode potential returns and compare products consistently for fair assessment.

How do VTI and VYM differ in terms of market exposure?

VTI tracks the total US stock market, offering broad exposure across large, mid, and small companies. Its top holdings include NVDA (6.87%), AAPL (6.30%), and MSFT (5.10%), indicating significant tech weighting. VYM targets high-dividend stocks, mainly large value companies like AVGO (6.93%), JPM (3.83%), and XOM (2.69%). VTI captures growth and overall market performance, while VYM prioritises dividend-paying firms, potentially favouring value over growth in bull markets. These strategies reflect different market perspectives.

What is dividend yield and how is it used in fund comparison?

Dividend yield measures annual dividends relative to share price. Higher yields suggest greater current income, but not necessarily higher total returns. VTI's dividend yield is 1.02%, while VYM's is 2.31%. These yields reflect their respective strategies: VTI mirrors the broader market, including lower-growth and growth stocks, while VYM deliberately selects companies with stronger dividend payouts. Investors comparing ETFs must consider yields alongside growth potential, fees, and market conditions for a holistic understanding of income and appreciation.

How do top holdings compare between VTI and VYM?

VTI and VYM share only AVGO among their top ten holdings. VTI's largest positions are NVDA (6.87%), AAPL (6.30%), and MSFT (5.10%), emphasising growth tech firms. In contrast, VYM's top holdings include AVGO (6.93%), JPM (3.83%), and XOM (2.69%), highlighting finance, energy, and healthcare. This limited overlap indicates distinct exposures. While both may include AVGO, their overall portfolios reflect different priorities: market breadth versus dividend focus, influencing potential performance in various sectors.

Can I expect similar performance from VTI and VYM?

Not necessarily. VTI targets the entire US stock market and typically reflects broad growth trends, including tech-heavy companies. VYM focuses on high-dividend stocks, which often perform differently in various market cycles. For example, VYM may underperform VTI during strong bull markets led by growth stocks but could offer steadier income and resilience in volatile periods. Comparing past returns is complex due to differing goals, yields, and fee structures. Sector weights are not available, limiting precise analysis.

How do sector concentration and diversification differ in these ETFs?

VTI has notable tech concentration, with top ten holdings including NVDA, AAPL, and MSFT, which are sector leaders. VYM holds more finance and energy stocks like JPM and XOM. While both are diversified across companies, their sector exposures vary. However, current sector weightings are not available, preventing an exact comparison. Generally, broad-market funds spread risk across sectors, while dividend ETFs lean towards industries with stable payouts. Investors should assess diversification beyond top holdings for a complete picture.

How does fund size and liquidity affect these ETFs?

VTI has $692.2 billion in net assets, and VYM has $80.9 billion. Both are considered highly liquid. VTI's size supports efficient market tracking and broad accessibility, with long inception (May 24, 2001) and established trading patterns. VYM, launched later (November 10, 2006), offers substantial liquidity too, facilitating income-focused strategies. In general, larger funds benefit from economies of scale, lower spreads, and ease of trading for most investors, though all trades face standard market risks.

What should I consider when comparing dividend yield and fees?

When comparing VTI and VYM, consider both yield and fees. VYM's higher yield (2.31%) may appeal to income seekers, while VTI's lower expense ratio (0.03% vs. 0.04%) minimises annual costs. Over long periods, even a 0.01 percentage point difference can compound, affecting net returns. Dividend yield isn't a guarantee—companies may cut payouts. The combination of yield, fees, and total return should guide understanding. Sector data is unavailable, so focus on fund objectives and historical cost factors.

VTI vs VYM

Two funds, one decision: we compare cost, performance and what each ETF actually holds in September 2026.

This page compares VTI (Vanguard Total Stock Market ETF) and VYM (Vanguard High Dividend Yield ETF). It examines fees, holdings, dividends, and how each fund tracks its market. VTI focuses on the total US stock market, while VYM targets high-dividend stocks. Educational content, not financial advice.

Fund Snapshot

Key Fund Metrics

VTI

Metric

VYM

0.03%

Expense Ratio

0.04%

1.02%

Dividend Yield

2.31%

$692.20B

Net Assets

$80.88B

3,514

Holdings

613

May 24, 2001

Inception Date

Nov 10, 2006

–

Index Tracked

–

Large Blend

Fund Category

Large Value

VTI costs about $1.00 less per year for every $10,000 invested.

Shared Top Holdings

Holding	VTI	VYM
AVGOBroadcom Inc.	2.37%	6.93%

Discover More Comparisons

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VTI vs VUG

Compare VTI and VUG ETFs. Analyse 0.03% fees, dividend yields of 1.02% versus 0.37%, and top ten holdings for a clear view on tracking differences.

VTI vs VTWO

Compare VTI and VTWO to check fees, holdings, dividends and tracking. See differences between large blend total market and small blend exposure.

Investment Analysis

VTI

Pros

The fund's expense ratio is extremely low at 0.03 percent, keeping holding costs minimal for investors.
With net assets of $692.2 billion, the fund offers significant liquidity and established market presence.
Inception in May 2001 demonstrates a long track record of managing US equity exposure for investors.

Considerations

The dividend yield is relatively low at 1.02 percent compared to many income-focused funds available today.
The portfolio has notable concentration in technology with the top ten holdings comprising significant weight.
Current sector weightings are not available, limiting immediate insight into specific industry exposures for analysis.

VYM

Pros

The fund delivers a higher dividend yield of 2.31 percent, appealing to income-seeking investors specifically.
Expense ratio is competitive at 0.04 percent, allowing for efficient access to high-yield equity strategies.
Net assets of $80.9 billion provide adequate liquidity for trading and reflect established investor adoption.

Considerations

The dividend yield may fluctuate if underlying companies reduce payouts during periods of economic uncertainty.
The portfolio holds significant value stocks, potentially lagging growth indices during strong bull markets.
Current sector weightings are not available, making detailed analysis of specific industry concentration difficult.

About VTI and VYM

VTI (VTI)

This ETF offers broad exposure to the US equity market by tracking a comprehensive index of publicly traded companies. Designed as a large blend fund, it holds thousands of individual stocks, ranging from massive multinational corporations to smaller domestic firms. With an ultra-low expense ratio of 0.03%, it aims to provide cost-efficient long-term growth potential. The fund has a dividend yield of approximately 1.02%, reflecting the aggregate distributions from its holdings. Investors often consider this vehicle for core portfolio diversification, though it is essential to remember that stock market investments carry inherent risks, and values can fluctuate. Past performance is not indicative of future results, and returns are not guaranteed.

VYM (VYM)

The Vanguard High Dividend Yield ETF is designed to provide investors with exposure to a broad range of high-dividend-paying stocks listed in the US. With a low expense ratio of 0.04% and over 600 holdings, the fund aims to deliver income while maintaining diversification. Its dividend yield sits at 2.31%, reflecting its focus on companies with strong payout traditions. This ETF suits those seeking a steady income stream as part of a long-term strategy, though values can rise and fall. Returns are not guaranteed. Always consider your personal circumstances before investing.

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VTI vs VYM

Fund Snapshot