Vanguard High Dividend ETF isn't perfect, but it could fill an important role for income investors. Vanguard High Dividend Yield ETF (VYM 0.56%) has its flaws, but then so does every other investment you will ever buy. What's interesting about the dividend-focused exchange-traded fund (ETF) is what it does well. Here's why some, though not all, dividend investors may want to back up the truck and buy this income-focused ETF like there's no tomorrow. 1. Vanguard High Dividend Yield ETF has an attractive yiel ...

Core Viewpoint - The article emphasizes the importance of creating a balanced investment portfolio by mixing stocks and bonds, suggesting a typical allocation of 60% in stocks and 40% in bonds, with variations based on individual risk tolerance [1][2][4]. Group 1: Stock Investments - A balanced portfolio should include both U.S. and international dividend-paying stocks, with the Vanguard High Dividend Yield ETF (VYM) focusing on U.S. stocks and the Vanguard International High Dividend Yield ETF (VYMI) covering international stocks [5][7]. - The Vanguard High Dividend Yield ETF consists of over 580 U.S. dividend-paying companies, with a dividend yield of 2.8%, which is more than double that of the S&P 500 index [6]. - The Vanguard International High Dividend Yield ETF includes over 1,500 international stocks, offering a higher dividend yield of 4.1% [7]. Group 2: Bond Investments - The bond market is larger and more complex than the stock market, making bond ETFs a suitable choice for most investors. The Vanguard Total Bond Market ETF (BND) provides exposure to the entire U.S. bond market [9]. - The Vanguard Total International Bond Market ETF (BNDX) complements the U.S. bond exposure by offering a diversified global bond portfolio, with yields of approximately 3.8% for BND and 4.2% for BNDX [10]. - A recommended allocation for bonds is to keep 60% to 75% in domestic bonds and the remainder in international bonds, ensuring diversification across the bond market [11]. Group 3: Portfolio Management - The proposed portfolio consisting of four ETFs is designed for long-term income and capital appreciation, requiring minimal management with only four trades to start and annual rebalancing [12].

Core Viewpoint - The "Magnificent Seven" stocks, which include Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, and Tesla, have significantly underperformed the S&P 500 in 2025, with Microsoft down 8.1% and Tesla down over 35% year-to-date, prompting investors to consider alternatives like the Vanguard High Dividend Yield ETF [1][2]. Group 1: Performance of the Magnificent Seven - The Magnificent Seven stocks contributed significantly to market gains in 2023 and 2024 but have seen a halt in momentum in 2025 [1]. - As of the current writing, all seven stocks are underperforming the S&P 500, with Microsoft down 8.1% and Tesla down over 35% [2]. Group 2: Vanguard High Dividend Yield ETF - The Vanguard High Dividend Yield ETF is highlighted as an attractive alternative for investors seeking low-cost ETFs that do not include the Magnificent Seven [2][7]. - This ETF has an expense ratio of 0.06%, which is slightly higher than the Vanguard S&P 500 ETF's 0.03%, but the difference is minimal for most investors [9]. - The Vanguard High Dividend Yield ETF targets companies with strong dividend growth and offers a more balanced sector exposure compared to the S&P 500 [9]. Group 3: Sector Exposure and Dividend Yield - The Vanguard High Dividend Yield ETF has a 2.9% dividend yield, roughly double that of the Vanguard S&P 500 ETF at 1.4% [10]. - The ETF is overweight in sectors such as financials (20.4%), healthcare (14.3%), and energy (9.4%), compared to the S&P 500 [10]. - The ETF's lower price-to-earnings ratio of 18.1 compared to the S&P 500's 23.9 indicates a more attractive valuation [10]. Group 4: Investor Suitability - The Vanguard High Dividend Yield ETF is suitable for risk-averse investors, income investors, and those looking for balanced exposure without increasing their holdings in the Magnificent Seven [11]. - During market volatility, the ETF serves as a reliable option for investors focusing on value and income [12].