VWRL versus VHYL

ChesterDog

I would suggest you adopt the mindset of John Bogle, who ought to know.

He is not a fan of selective ETFs and would doubtless advocate owning the whole market, or as much of it as is reasonably feasible.

So VWRL.

darkidoe

EnglishMohican wrote: »

About 4 years ago, I bought some Vanguard World Equity ETF shares and some Vanguard World High Dividend ETF shares.

Over the 4 years, the VWRL dividend has been around 2% while the VHYL dividend has been about 3.1% but VWRL has increased in capital value by 50% while the VHYL shares have only increased by 25%.

With hindsight, it is easy to say I would have been better off over those 4 years if I has used all of the money to buy VWRL and forgot about VHYL. I am now trying to work out whether it is worth keeping the VHYL or whether to sell them and buy more VWRL.

I realise that capital value can go down as well as up, so I was lucky with the VWRL over the last 4 years. Maybe the capital value of the VHYL is more stable than the VWRL and will go down less in bad periods though it needs to go a down a lot less to compensate for the lack of gain in the good periods. I do not think that the 1% extra dividend would really brighten my day if the capital values all fell by 20%.

Are there other factors that I should include in the calculation and how would you decide whether to keep both?

One of the biggest choice you have to make as an investor is asset allocation, ie. the percentage of each fund/share you decide to hold in your portfolio. The out performance of VWRL compared to VHYL might skew that allocation that you determine out of proportion and you might decide to rebalance this back to the initial designated allocation.

I own the VHYL as well and i use it as a value tilt and also to reduce over exposure to the tech (FAANG) stocks that dominate the VWRL and also improve overall dividends.

The usefulness of the above method previous unchecked bubbles forming in your portfolio, ie where a certain sector eg Tech or a few companies dominating your porfolio making you overly exposures to a fall in that few companies or that particular sector. Rebalancing back to your predetermined allocation allows you to 'buy' the relatively under-valued fund/stocks and 'sell' the over valued ones.

Monevator has a series of articles which describes this well: Rebalancing asset allocation