Author Topic: Exchange some VTSAX for VHYAX or no?  (Read 1378 times)

Wayward

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Exchange some VTSAX for VHYAX or no?
« on: March 05, 2021, 08:24:37 PM »
I've been faithfully investing in VTSAX in my Vanguard IRA and brokerage accounts and have been super happy with it. Recently I started to research adding different funds to diversify my assets and bought the minimum ($3,000 each) for VTIAX to get international exposure and VGSLX for REITs.

Now I'm considering exchanging $3,000 worth of VTSAX in my Roth IRA for VHYAX. The reason is because I would like a higher dividend return, which may help my account grow even faster. Comparing the two on Vanguard's site though seems like VTSAX yielded $0.38 per share and VHYAX yielded $0.24 per share in Dec 2020... What am I missing? Isn't the VHYAX supposed to have higher dividends?

Does anyone hold VHYAX? What are your experiences with it? Would it be worth holding a small amount of my assets in it? Is there anything I'm not considering?

Thank you

Holocene

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Re: Exchange some VTSAX for VHYAX or no?
« Reply #1 on: March 06, 2021, 11:04:20 AM »
You're missing that the shares prices are different between these funds.  VTSAX shares are ~3x the cost of VHYAX shares.  You can't just compare the absolute dividend payment per share.  You need to look at dividend yield as a percentage of the share price.  Look at the 30 day SEC yield.  Vanguard lists this for each fund.  For VTSAX it is currently 1.33%.  For VHYAX, it's 3.04%.  This may not be a perfect, but at least it's standardized and a way to compare.

There is no free lunch though.  VHYAX invests in companies that pay higher dividends.  But some companies pay low dividends and re-invest to grow the company/stock more so will likely see more price appreciation.  Do you really want to ignore those companies?  Personally, I'd rather just own the whole market.  It's simpler and I think less risky not to discriminate against companies that pay low dividends.

One thing to remember is that if you hold VHYAX in a taxable account, you will have to pay taxes on those higher dividends every year, assuming you're over the income limit for the 0% fed rate.  Even then, your state may tax you for it.  The more you pay in taxes now, the less money there is left to compound over time.  Lower dividends are better in taxable accounts, since you have the choice of when to sell and take capital gains.  If you hold this fund in your IRA, this would not be a concern.

I'd do a bunch of research now and figure out what you want your asset allocation to be.  How much in stocks and bonds, but also what types of stocks to invest in.  Total US, large/mid/small cap US, international, emerging markets, REITs, high dividend, high growth, etc.  Write this down, then stick to it.  The hardest part of investing is keeping the emotions out of it.  Having a plan written out that you just need to execute to makes things a lot easier.  Before you just start throwing $3k in each fund that sounds good, figure out a plan.

Heckler

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Re: Exchange some VTSAX for VHYAX or no?
« Reply #2 on: March 06, 2021, 12:59:55 PM »
I would always consider total return if you want to help grow your account faster.

https://investor.vanguard.com/mutual-funds/profile/performance/vhyax

Look at the 1 year performance (VHYAX is only one year old, so you can't easily compare longer), $10,000 grew to $11,951 with HY and $13,560 with VTSAX.  Simple decision in my view, unless your taxable implications prefer dividends over capital gains.

This past year was also shit for dividends, but crazy for high tech stonks but I believe in high diversification.  The HY find only has 410 holdings, so you are not at all diversified - it misses out on the 8 of the top 10 of VTSAX.

Telecaster

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Re: Exchange some VTSAX for VHYAX or no?
« Reply #3 on: March 06, 2021, 02:58:21 PM »
I've been faithfully investing in VTSAX in my Vanguard IRA and brokerage accounts and have been super happy with it. Recently I started to research adding different funds to diversify my assets and bought the minimum ($3,000 each) for VTIAX to get international exposure and VGSLX for REITs.

Now I'm considering exchanging $3,000 worth of VTSAX in my Roth IRA for VHYAX. The reason is because I would like a higher dividend return, which may help my account grow even faster. Comparing the two on Vanguard's site though seems like VTSAX yielded $0.38 per share and VHYAX yielded $0.24 per share in Dec 2020... What am I missing? Isn't the VHYAX supposed to have higher dividends?

Does anyone hold VHYAX? What are your experiences with it? Would it be worth holding a small amount of my assets in it? Is there anything I'm not considering?

Thank you

For an apples to apples dividend comparison, the number you want is the dividend yield,  which is 3.04% for VHYAX and 1.37% for VTSAX.   However when it comes to stock investing, dividends are an illusion.    Because as the money leaves the company in the form of dividends, the book value of the company goes down by the amount of the dividend.  All things being equal, high dividend payers cannot grow total value faster than low or no-dividend payers. 

So personally,  I wouldn't bother.

MustacheAndaHalf

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Re: Exchange some VTSAX for VHYAX or no?
« Reply #4 on: March 06, 2021, 08:37:41 PM »
VTSAX has 10-year performance of 13.45% annualized:
https://investor.vanguard.com/mutual-funds/profile/performance/vtsax

VHYAX was created months ago, and lacks 10 year performance.  But it tracks a benchmark with 10-year performance of 11.46%.
https://investor.vanguard.com/mutual-funds/profile/performance/vhyax

Wayward

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Re: Exchange some VTSAX for VHYAX or no?
« Reply #5 on: March 10, 2021, 01:26:59 PM »
Thank you all for replying!  I've decided not to invest in VHYAX at all. 

I did expand my asset allocation to include percentages of VTIAX and VGSLX and can't be happier!

dougules

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Re: Exchange some VTSAX for VHYAX or no?
« Reply #6 on: March 10, 2021, 03:10:12 PM »
You might take a look at VTWAX, too. 

Wayward

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Re: Exchange some VTSAX for VHYAX or no?
« Reply #7 on: March 14, 2021, 08:07:52 PM »
You might take a look at VTWAX, too.
I did research that one, but decided against it since over half of it is North American stocks and I invest heavily in VTSAX.  8 of the top 10 companies it invests in are also in VTSAX so I thought it would be repetitive. I like that I can control my asset allocation of purely international stocks more accurately with VTIAX