Retirees Who Picked VIG Over VYM in 2022 Are Still $10,000 Behind on Every $100,000
Both VIG and VYM charge the same fee and hold blue-chip dividend payers, so most investors assume the choice barely matters. For retirees who started drawing income in 2022, that assumption turned a routine fund decision into a five-figure mistake.
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Putting $100,000 into the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) at the Dec 31, 2021 close would now be worth $150,580 with dividends reinvested. The same money in the Vanguard High Dividend Yield ETF (NYSEARCA:VYM) is worth $160,817. Yet VIG has posted the better returns for nearly four years running.
Both charge 0.04%, so many investors treat them as interchangeable. They own very different businesses. For someone already drawing income, the order in which returns arrived counted more than the long-run average. This is a sequence-of-returns problem: one bad year at the start of retirement can outweigh several good ones later.
One Year Created Nearly the Entire Gap
In 2022, VIG lost 10% while VYM lost only 0.43%. By year-end, the VIG investor held $90,214 against $99,561 for the VYM investor.
From January through September 2022, VIG fell 20%, and VYM fell 13%. A retiree sold shares to fund withdrawals during that stretch. They permanently gave up the shares that would have participated in the recovery.
Since Jan 1, 2023, VIG returned 67% against 62% for VYM. The faster grower might seem to be catching up, but the dollar gap grew from $9,347 to $10,237.
VIG’s higher percentage, applied to a smaller balance, produced $60,366 in gains, while VYM’s lower percentage on a larger balance produced $61,256. A fund that falls further must outperform by a wide margin for years just to hold its dollar position.
A Growth Fund With a Dividend Filter
VIG requires ten or more consecutive years of dividend increases, which selects financially stable large companies. In practice, that means technology. Microsoft (NASDAQ:MSFT | MSFT Price Prediction) is its largest holding at 5%, with two more tech giants close behind at 5% and 4%.
VYM screens on current yield, which tilts it toward banks and energy. JPMorgan Chase (NYSE:JPM) accounts for 4% and ExxonMobil (NYSE:XOM) accounts for 3%.
The Fed lifted its upper target to 4.5% by the end of 2022. Growth valuations contracted while energy earnings expanded.
VYM Pays Far More Income on $500,000
VYM yields 2.3%, and VIG yields 1.5%, yet their annual payouts per share are nearly identical at $3.68 and $3.65.
The yield gap comes entirely from price. VIG trades near $237 and VYM near $158.
On $500,000, that’s roughly $11,600 a year from VYM versus $7,700 from VIG. The extra income gets taxed annually, which matters if you are managing bracket thresholds.
What a Decade of Returns Says About Each Fund
VIG holds the better ten-year record at 13% a year against 12%, while VYM leads over five years at 11.40% against 10.52%. Evaluating either fund on the last three years alone is misleading.
VYM fell 14% in the 2025 selloff. An energy downturn, a bank credit event, or a sustained drop in rates would each shift the advantage toward VIG.
VYM has been the better fit for someone drawing income now. VYM protected capital better in a rate-driven selloff and pays significantly more. With the Fed’s upper target at 4% and the 10-year Treasury near 5%, the conditions that hurt VIG in 2022 are back.
VIG has historically suited investors with ten or more years before withdrawals begin, because a long runway lets its compounding recover from declines before any shares must be sold.
For someone five to ten years from retirement, holding both would offset each fund’s sector tilt in rate shocks.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
