Vanguard VWRL or VHYL which one ?

[scotview]

Evening all,

I've been tracking these two recently with a view to a purchase.

In the last 6 months VWRL is down about 6% and has a yield of about 1% whereas VHYL is up about 1% and has a yield of about 3.5%.

Obviously we don't know what will happen in the near term but the S&P is down another 3% tonight again. There also seems to be a shift to quality which would suggest VHYL (high yield) might be a better bet in the medium term.

Which ETF do you think would be the better choice for the coming year, bearing in mind that most members of this board seem to favour VWRL.

Many thanks in advance,
Scotview.

[Hariseldon58]

No one knows but over the long term the difference between VHYL and VWRL is significantly in favour of VWRL.

I’d take a look at the top 10 holdings in VWRL and decide whether you wish to bet against them over the long term.

The next 12 months is simply speculating, far too many uncertainties to know which one will outperform.

If you hold VWRL you hold all the stocks in VHYL anyway!

[GeoffF100]

There also seems to be a shift to quality which would suggest VHYL (high yield) might be a better bet in the medium term.

VHYL is not quality, it is high yield. It has less diversification than VWRL. Sometimes it will do better. Sometimes worse. VWRL is safer, but you might get lucky with VHYL.

[DrFfybes]

VHYL is not quality, it is high yield. It has less diversification than VWRL. Sometimes it will do better. Sometimes worse. VWRL is safer, but you might get lucky with VHYL.

I can see a place for VHYL in a portfolio, but I wouldn't class it strictly as a passive Investment. Sure it tracks and index, but there are selection criteria for that index. It only chooses from 50% of available shares, it is only rebalanced twice a year, so if (say) oil rises and BP goes up in price, AIUI it will be increased in the rebalance, and a lot can happen to oil (company) prices in 6 months. A rebalance a month ago would give quite a different distribution to one today.

5 year performance of VWRL far outstrips VHYL and is generally a bit 'smoother'
https://www.vanguardinvestor.co.uk/inve ... erformance
https://www.vanguardinvestor.co.uk/inve ... erformance

[tjh290633]

There also seems to be a shift to quality which would suggest VHYL (high yield) might be a better bet in the medium term.

VHYL is not quality, it is high yield. It has less diversification than VWRL. Sometimes it will do better. Sometimes worse. VWRL is safer, but you might get lucky with VHYL.

Just as an indication, the FTSE100 (UKX) is down -5.69% on the year to date. The FTSE350HY (HIX) is down just -0.60% in the same time. This suggests that people are buying more shares with a higher yield. Until a few years ago, HIX was well ahead of LIX, its low yield counterpart. The TR Version of HIX was 7303.86 last night, whereas LIX TR was 4984.55.

Search for "World Markets at a glance".

TJH

[hiriskpaul]

VHYL is not quality, it is high yield. It has less diversification than VWRL. Sometimes it will do better. Sometimes worse. VWRL is safer, but you might get lucky with VHYL.

I can see a place for VHYL in a portfolio, but I wouldn't class it strictly as a passive Investment. Sure it tracks and index, but there are selection criteria for that index. It only chooses from 50% of available shares, it is only rebalanced twice a year, so if (say) oil rises and BP goes up in price, AIUI it will be increased in the rebalance, and a lot can happen to oil (company) prices in 6 months. A rebalance a month ago would give quite a different distribution to one today.

5 year performance of VWRL far outstrips VHYL and is generally a bit 'smoother'
https://www.vanguardinvestor.co.uk/inve ... erformance
https://www.vanguardinvestor.co.uk/inve ... erformance

VHYL is cap weighted, so no rebalancing is done due to share price fluctuations. Rebalancing would be done for essentially 2 reasons. 1) Shares being filtered entirely in and out of the index, eg by variation of the dividend yield in this instance (which may of course happen due to share price changes). 2) By a variation in the free float of shares, due to rights issues, takeovers and other corporate actions. This happens for all cap weighted funds.

It is a myth that cap weighted funds buy more shares in a company when its share price rises. If it did, the fund would not be cap weighted.

[hiriskpaul]

Evening all,

I've been tracking these two recently with a view to a purchase.

In the last 6 months VWRL is down about 6% and has a yield of about 1% whereas VHYL is up about 1% and has a yield of about 3.5%.

Obviously we don't know what will happen in the near term but the S&P is down another 3% tonight again. There also seems to be a shift to quality which would suggest VHYL (high yield) might be a better bet in the medium term.

Which ETF do you think would be the better choice for the coming year, bearing in mind that most members of this board seem to favour VWRL.

Many thanks in advance,
Scotview.

VWRL is essentially the market. VHYL is a subset based on particular systematically applied selection criteria. It is pure guesswork to say which one will do best over one year.

In aggregate, VHYL's selection criteria results in a portfolio overweight shares on lower price valuation metrics such as p/e and p/b, but probably not on peg. It is essentially a value tilted fund. Value shares have not performed as well over the last 10 years or so compared to the market as a whole and this is reflected in the performance of VHYL. There are many proponents of value investing who say this will not last and essentially a "reversion to the mean" is likely to occur and value shares will outperform again. Equally there are proponents of growth shares who take the opposite view for various reasons.

The fact is, nobody knows and this is all speculation. Betting on VHYL might payoff, but one thing you can be certain about is that there is no risk of VWRL significantly underperforming the market, which is not the case with VHYL. Also there is copious evidence to show that a full market tracker will outperform most actively managed funds over the long term. After 20 years the tracker is unlikely to be the top performer, but it is very likely to be in top decile.

Nothing to stop you investing in both of course. If VHYL outperforms, you would capture some of the outperformance and if it underperforms, at least you will not suffer as much had you gone fully in.

[swill453]

5 year performance of VWRL far outstrips VHYL and is generally a bit 'smoother'
https://www.vanguardinvestor.co.uk/inve ... erformance
https://www.vanguardinvestor.co.uk/inve ... erformance

It's not clear that the "lump sum investment" chart is on a Total Return basis, do you know? If not then the higher yield of VHYL won't be featured.

Scott.

[DrFfybes]

5 year performance of VWRL far outstrips VHYL and is generally a bit 'smoother'
https://www.vanguardinvestor.co.uk/inve ... erformance
https://www.vanguardinvestor.co.uk/inve ... erformance

It's not clear that the "lump sum investment" chart is on a Total Return basis, do you know? If not then the higher yield of VHYL won't be featured.

Scott.

I think it is. The site isn't clear, but under "Past Performance" but before "Past Performance based on a lump sum investment" it says...

"Basis of fund performance NAV to NAV, net of expenses, with gross income reinvested. For ETFs, where the base currency is either Euro or US Dollar, returns may increase or decrease as a result of currency fluctuations."

Vanguard's link is 28 Feb to 28 Feb. Over 3 years return is 45%
On HL for the same period the share price rises 37%.

Paul

[richfool]

I tend to prefer VEVE as it doesn't include EM and by definition Russia.

[DrFfybes]

I tend to prefer VEVE as it doesn't include EM and by definition Russia.

Agreed, as Geoff100 pointed out, circa 90% of the market with 0.09% on cost rather than 0.22% for VWRL.

VEVE is my largest single holding.

Paul

[TahiPanasDua]

I tend to prefer VEVE as it doesn't include EM and by definition Russia.

Agreed, as Geoff100 pointed out, circa 90% of the market with 0.09% on cost rather than 0.22% for VWRL.

VEVE is my largest single holding.

Paul

As VEVE is VWRL less the EM, you, of course, get even more of the tech holdings, Apple etc. I am trying to stay clear of such companies, so will not add to my VWRL. I find it difficult to believe that the enormous market premiums are justified. I really don't believe it is different this time. I am not a perennial bear having the vast majority of my assets in the stock market. Only time will tell. Ho-hum.

TP2

[jackdaww]

.

i have used hsbc.world.etf.... hmwo .

charges are lower than vwrl.

[Degsy67]

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i have used hsbc.world.etf.... hmwo .

charges are lower than vwrl.

I also hold HMWO to provide my global market exposure but also hold VHYL to provide a value tilt with VHYL having the added feature of throwing off more cash in percentage terms. As I’ve just moved into drawdown, the cash dividends help with income withdrawal planning while still providing global market exposure.

Degsy