VYM - Long-Term Investing Vs. Short-Term Hype: Why SCHD Prevails Over VYM

2024-06-20 09:20:28 ET

Summary

• VYM's recent outperformance overlooks SCHD's superior long-term total returns, dividend metrics, and risk-adjusted returns.
• Interest-rate sensitivity, performance during downturns, and Yield on Cost difference reflect the underlying holdings of SCHD are of higher quality than VYM.
• Despite VYM being more diversified than SCHD, its risk-adjusted returns and market correlation are worse, showing that adding more holdings is not reducing a dividend investor's risk to compensate for the lower performance of VYM.

A grave mistake in the investment community, and one I'm constantly pushing back against, is to look at short-term performance of assets and apply it to a long-term investment strategy. Of late, Vanguard High Dividend Yield ETF ( VYM ) is one such fund dividend investors have being voicing across social media that's piquing their interest and making them think to diversify away from Schwab U.S. Dividend Equity ETF ( SCHD ) or dump SCHD altogether. The driving force behind this opinion of VYM being a better investment than SCHD stems from VYM's short-term outperformance to SCHD since 2022: Total return being about 27% vs. 16% for SCHD. This conviction does not take into account the superior long-term total returns, dividend performance, and risk-adjusted returns of SCHD....

For further details see: