VIG vs. VYM: Which Vanguard Dividend ETF Is the Better Buy?

Core Viewpoint - The Vanguard Dividend Appreciation ETF (VIG) and the Vanguard High Dividend Yield ETF (VYM) are two prominent dividend ETFs, each with distinct strategies and characteristics, making them suitable for different investment goals [1][2]. Group 1: ETF Characteristics - VIG tracks the S&P U.S. Dividend Growers Index, focusing on companies that have increased their dividend payments for the past 10 years while excluding the top 25% highest-yielding companies [4]. - VYM tracks the FTSE High Dividend Yield Index, including companies with forecasted dividend payments higher than average, but excludes real estate investment trusts (REITs) [6]. Group 2: Investment Strategies - VIG's strategy aims to avoid yield traps by considering forward-looking yields and eliminating high-yielders, although it gives greater weight to larger companies rather than those with better dividend histories [5]. - VYM's broad starting universe dilutes its exposure to pure high-yield stocks, and its market-cap-weighting further reduces emphasis on yield [6]. Group 3: Cost Efficiency - Both ETFs have low expense ratios, with VIG at 0.05% and VYM at 0.06%, making them among the cheapest options in the dividend ETF space [7]. Group 4: Market Positioning - With a weaker economic and labor market outlook heading into the new year, one of these ETFs may offer a better portfolio positioning advantage [8].