VOO vs VYM: Side-by-Side ETF Comparison

Which one is better? VOO focuses on growth and tech-heavy exposure with higher long-term returns, while VYM prioritizes dividend income and stability through value-oriented stocks.
For most investors, combining both can offer a balanced mix of capital appreciation and consistent income.

Table of Content

ETF Issuers & Investment Objective

• VOO: Also managed by Vanguard and introduced in 2010, VOO aims to replicate the performance of the S&P 500 Index. It offers broad exposure to the 500 largest U.S. companies, with a strong tilt toward growth and technology, making it a foundational ETF for investors focused on long-term capital appreciation through market-wide participation.
• VYM: Managed by Vanguard since its launch in 2006, VYM tracks the FTSE High Dividend Yield Index. It is designed to provide exposure to U.S. companies that consistently pay above-average dividends, making it a popular choice for income-focused investors seeking stability and cash flow from mature, value-oriented firms.

Annual & Cumulative Returns

VOO has outperformed VYM across every major time horizon, including 3-, 5-, and 10-year returns. This is primarily due to its heavy exposure to growth sectors like technology, which have driven much of the stock market’s appreciation in the past decade. For a retail investor aiming to build long-term wealth through compounding capital gains, VOO has been a more powerful engine. On the flip side, while VYM lags in total returns, it has shown resilience during market drawdowns and provided more stability in income-driven sectors making it a solid defensive choice when growth falters.

Risk Metrics

Despite similar levels of volatility, VOO has delivered a much higher Sharpe ratio, meaning investors have been rewarded more for every unit of risk taken. This matters greatly for retail investors who may be tempted by VYM's "safer" appearance because even if it swings slightly less, it doesn't necessarily provide a better return experience. If you're looking for efficient risk-taking with higher return potential over time, VOO stands out as the more effective vehicle.

• Volatility reflects the degree of price fluctuations; higher volatility often correlates with greater risk and potential returns.
• Sharpe Ratio measures risk-adjusted returns, where higher ratios indicate more favorable returns for the risk assumed.

Dividend Yield & Growth

This is where VYM takes the lead. With a dividend yield nearly twice that of VOO, VYM can serve as a reliable source of passive income ideal for retirees or investors aiming to supplement income without selling shares. Its methodology targets companies with above-average dividends, which tend to be mature, cash-rich businesses. On the other hand, VOO includes more companies that reinvest profits for growth, which may benefit long-term compounding but provide less cash flow in the present.

Fees & Liquidity

While both ETFs are extremely cost-effective, VOO’s lower expense ratio (0.03%) and higher liquidity give it a slight edge, especially for active traders or larger portfolios. These small differences can compound over time. For the average retail investor, the takeaway is clear: both are low-cost, but if you're looking for maximum efficiency and minimal slippage, VOO wins by a narrow margin.

Explanation:

• Expense Ratio is the annual fee taken by the fund manager, expressed as a % of your investment.
• Bid-Ask Spread is the difference between the buying and selling price. Smaller spreads mean lower transaction costs.

ETF Composition: Asset Classes

Both funds maintain a strong domestic bias, but VYM includes a slightly larger share of international equities mostly developed markets in Europe. This is a byproduct of its focus on high-yielding stocks, which occasionally includes foreign companies listed in the U.S. (e.g., ADRs). For investors wanting a tiny dash of geographic diversification without buying international funds, VYM adds a bit more flavor.

Regional Allocation

The regional exposure for both ETFs is overwhelmingly tilted toward North America, meaning you're effectively betting on the U.S. economy either way. However, VYM introduces a touch more exposure to international markets like the UK and Europe, making it slightly more globally diversified though not enough to meaningfully reduce geographic concentration risk.

Sector Weights

The sector weightings sharply reflect each ETF’s philosophy. VOO is dominated by technology and communications, sectors that have led bull markets but can be more volatile. VYM tilts toward financials, consumer defensives, and industrials, which tend to be more mature, dividend-paying, and less prone to valuation swings. For retail investors, this means VOO offers more upside in booming markets, while VYM may feel steadier during turbulence.

Top 10 Holdings

VOO’s top 10 includes the usual tech giants: Apple, Microsoft, NVIDIA companies known for aggressive growth and innovation. VYM, by contrast, features dividend champions like JPMorgan, Coca-Cola, and Broadcom. If you're trying to decide between chasing future growth (VOO) or backing stable cash-generating businesses (VYM), this table makes that philosophical split crystal clear.

Valuation & Growth Metrics

Valuation Ratios

VYM looks cheaper across every major valuation metric P/E, price-to-book, and price-to-sales, but that’s not automatically a bargain. Lower valuations typically reflect slower growth expectations or cyclical exposure, which VYM has in sectors like energy and financials. VOO’s higher multiples are justified by the premium investors pay for growth and predictability in tech-led companies. Retail investors should ask: are you buying future potential or steady value?

Explanation:

• P/E Ratio = Price divided by earnings. Indicates how expensive a fund is relative to profits.
• Price/Book = Price vs book value (assets minus liabilities).
• Price/Sales = Price relative to total revenue.
• Price/Cash Flow = Price relative to how much cash the companies generate.

Growth Expectations

VOO clearly leads when it comes to growth across earnings, sales, and cash flow key drivers of long-term capital appreciation. These figures reinforce that VOO is suited for investors with a longer time horizon and higher risk tolerance. In contrast, VYM’s slower growth reflects its tilt toward companies that are already in their mature, cash-distributing phase. It's ideal for those prioritizing income reliability and capital preservation over aggressive growth.

Which ETF Fits Your Portfolio - VOO vs VYM?

VOO is built for investors aiming to accumulate wealth over time through exposure to America’s largest and most innovative companies. Its tech-heavy composition and growth orientation make it a powerful long-term engine for compounding returns, but it comes with more volatility, especially during market corrections.

VYM, by contrast, can function as a stabilizer and income generator. With its focus on high-dividend, value-tilted stocks, it offers steady cash flow and typically holds up better during downturns, making it attractive for those nearing retirement, risk-averse investors, or anyone building an income-focused core.

Rather than choosing one over the other, many retail investors will benefit from a core-satellite approach: use VOO as a growth-focused core and VYM as a dividend-focused anchor. Together, they offer a complementary mix of capital appreciation and income resilience that adapts well to different market cycles and life stages.