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ETF Specialist

This ETF Offers High Yield While Keeping Risk in Check

Yield is just part of the equation.

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In an environment where trillions of dollars’ worth of assets sport negative yields, investors want reliable sources of income. But reaching for yield is risky business. Investors would be wise not to overreach. Vanguard High Dividend Yield ETF (VYM) is one of the best options for investing in high-dividend-yielding stocks without taking on too much risk. Broad diversification and market-cap weighting help the fund balance current yield and risk and support the fund’s Morningstar Analyst Rating of Silver.

The fund tracks the FTSE High Dividend Yield Index. This benchmark sorts stocks by their dividend yield and adds names to the portfolio until it captures half of the dividend-paying universe’s market capitalization. This leads to a broad portfolio that diversifies away most stock-specific risk. As of August 2019, it held more than 400 stocks with only 27% of assets in its 10 largest positions.

Venkata Sai Uppaluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.