How to Invest in Vanguard High Dividend Yield ETF (VYM)

The Vanguard High Dividend Yield ETF, managed by Vanguard, aims to track the FTSE High Dividend Yield Index, this ETF excludes REITs to focus on investments that offer lower qualified dividend tax rates.

The Vanguard High Dividend Yield ETF (VYM 0.84%) is a well-diversified exchange-traded fund (ETF) managed by The Vanguard Group, a top asset management firm owned by investors in its funds. As of late 2024, the dividend ETF had approximately $73 billion in total net assets.

The fund's diversification across multiple sectors and its exposure to a variety of popular income-generating stocks have made it a top choice for many dividend investors. This guide will provide you with all the essential information about the Vanguard High Dividend Yield ETF and offer insights on how to invest in ETFs as a beginner.

What is the Vanguard High Dividend Yield ETF?

The Vanguard High Dividend Yield ETF is managed by Vanguard, one of the largest and most reputable providers of ETFs. Unlike many ETFs that aim to replicate the performance of a specific index, this ETF tracks the FTSE High Dividend Yield Index, which measures the investment returns of common stocks from companies with high dividend yields.

This ETF employs a passively managed, full-replication strategy, meaning it includes all the securities in the FTSE High Dividend Yield Index in the same proportions. It primarily focuses on large-cap stocks that offer above-average dividend yields.

The Vanguard High Dividend Yield ETF features stocks with the highest dividend yields and intentionally excludes real estate investment trusts (REITs) from its portfolio. This is because REIT distributions are generally not classified as qualified dividends and are typically taxed as ordinary income. By excluding REITs, the ETF concentrates on investments that benefit from lower qualified dividend tax rates.

How to Buy the Vanguard High Dividend Yield ETF

Purchasing shares of the Vanguard High Dividend Yield ETF is straightforward. You can buy shares directly through Vanguard or via your brokerage account. Here’s a step-by-step guide:

Step 1: Open Your Brokerage App
Log into your brokerage account where you manage your investments. If you don't have an account with your current broker or with Vanguard, you’ll need to open one first. Setting up a brokerage account typically takes just a few minutes.

Make sure to research to find the best broker that aligns with your investment needs. Look for features that suit your objectives, such as low trading fees, no minimum account balances, a variety of investment options, and useful research and analysis tools.

Step 2: Search for the ETF
Once you're logged in, enter the stock ticker VYM in the search bar. Alternatively, you can type in the full name of the Vanguard High Dividend Yield ETF to access its trading page.

Step 3: Determine How Many Shares to Purchase
Think about your investment goals and the portion of your portfolio you want to allocate to this ETF. A well-diversified portfolio, representing various sectors and stocks, can help enhance your returns over time. It's advisable to invest only cash that you plan to hold for at least five years, ideally longer.

One of the key benefits of the Vanguard High Dividend Yield ETF is that it provides instant diversification. By investing in this ETF, you gain partial ownership in the hundreds of companies it includes. Some investors prefer to allocate their funds exclusively to ETFs, while

Step 4: Submit your order
Once you've confirmed the number of shares you want to buy or the amount you want to invest, check the details one more time. Then, submit your buy order to invest in the Vanguard High Dividend Yield ETF.

Holdings of the Vanguard High Dividend Yield ETF

The Vanguard High Dividend Yield ETF tracks the FTSE High Dividend Yield Index. As of late 2024, the ETF contained 536 stocks with a median market cap of $142 billion. At the time of this article, the ETF's top 10 holdings are as follows:

1. Broadcom (AVGO 0.18%): 4.38%
2. JPMorgan Chase (JPM 1.55%): 3.61%.
3. Exxon Mobil (XOM -0.11%): 2.97%
4. Home Depot (HD 2.33%): 2.21%
5. Procter & Gamble (PG 2.04%): 2.21%
6. Johnson & Johnson (JNJ -0.21%): 2.19%
7. AbbVie (ABBV 3.04%): 2.05%
8. Walmart (WMT 2.32%): 2.02%
9. Bank of America (BAC 1.16%): 1.61%
10. Merck (MRK -0.68%): 1.47%

These 10 stocks have the most significant impact on the returns of the Vanguard High Dividend Yield ETF. Like the index it seeks to track, this ETF has diversified exposure to several stock market sectors.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.