VYM vs VOO: 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

• 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.
• 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.

Annual & Cumulative Returns

Over all key time periods, VOO outperforms VYM in total returns especially in the 3-, 5-, and 10-year spans due to its heavy allocation to high-growth sectors like technology and communication services. In contrast, VYM’s dividend-focused, value-oriented approach lags during growth-dominant bull markets, though it held up well YTD thanks to strong performances in energy and defensive sectors.

Risk Metrics

While both ETFs show relatively similar volatility profiles, VOO achieves a significantly better Sharpe ratio over 3 years. That means VOO delivered more return per unit of risk largely because tech-driven gains were sustained while VYM’s performance was dampened by cyclical sectors with uneven earnings growth.

• 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

The dividend yield is where VYM shines. With nearly double the payout of VOO, it appeals to income-focused investors. VYM screens for stocks with above-average dividends, often selecting mature, lower-volatility companies, whereas VOO represents the broader market, including many companies that prioritize reinvestment over payouts.

Fees & Liquidity

VOO edges out VYM with a lower expense ratio and tighter bid-ask spreads, a result of its massive trading volume and scale. These micro-costs matter more to short-term traders and large accounts, making VOO slightly more attractive from a liquidity and efficiency perspective.

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 are almost entirely invested in U.S. stocks, but VYM includes slightly more international exposure particularly in developed Europe. This subtle diversification is likely due to its methodology of targeting high-yield stocks, which occasionally pulls in large non-U.S. companies.

Regional Allocation

Regionally, both ETFs are nearly identical with overwhelming focus on North America. VYM’s marginally greater allocation to Europe and the UK reflects its broader dividend screening, which can sometimes select ADRs or U.S.-listed international dividend payers.

Sector Weights

Sector composition tells the story of growth vs value. VOO is tech-heavy, while VYM leans into financials, consumer defensive, and industrials classic dividend-rich sectors. These allocations explain much of the long-term performance gap: tech has outpaced value stocks over the past decade.

Top 10 Holdings

A glance at top holdings confirms each fund’s strategy: VOO is stacked with growth giants like Apple, Microsoft, and NVIDIA, which dominate the S&P 500. VYM omits many of these due to their lower yields, instead favoring dividend stalwarts like Broadcom, JPMorgan, and Coca-Cola.

Valuation & Growth Metrics

Valuation Ratios

VOO trades at higher valuation multiples across all categories P/E, price/book, and price/sales, because it holds faster-growing companies that investors are willing to pay a premium for. VYM appears cheaper on paper, but that comes with slower earnings and more stable business models.

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

Growth expectations further reinforce the narrative: VOO is built for expansion, with superior long-term earnings and cash flow growth projections. VYM, meanwhile, trades slower capital appreciation for consistent dividends and balance sheet stability suited to more conservative, income-focused investors.

Which ETF Fits Your Portfolio - VYM vs VOO?

Choosing between VYM and VOO ultimately comes down to your investment goals and risk tolerance.

If you're seeking long-term capital appreciation and can stomach short-term volatility, VOO is likely the better fit. Its strong exposure to high-growth tech and innovation-driven companies has historically delivered superior returns, making it ideal as a core equity holding for growth-oriented investors.

On the other hand, VYM is tailored for those prioritizing income and stability. With a nearly 3% dividend yield and focus on mature, value-oriented companies, it offers more consistent payouts and tends to hold up better during market downturns suiting retirees, income-focused investors, or those looking to diversify equity risk.

Ultimately, many investors don’t pick just one. A blend of VOO and VYM can create a balanced portfolio combining the growth power of the S&P 500 with the defensive, income-producing qualities of high-yield dividend stocks.