Vanguard High Yield ETFs

[Johny01]

Hi

I have recently become attracted to Vanguard's UK FTSE tracker ETF at 4.6% yield and their worldwide high yield etf. Their charges are 0.25%.

They are both low risk, very well diversified and good yields.

It moves me away from Pyad's HYP strategy but has many of the same characteristics. Am I missing some risk/problem or do others follow these ETFs

John

[langley59]

I have accumulated a sizeable position in the worldwide ETF (VHYL) since 2016 and view it as a long term hold for exposure to overseas markets and for the dividend yield. My yield on cost in 2019 was 3.78%, yield based on its market value slightly lower just below 3.5%. I have an approximately 10% unrealised capital gain over that period.

I have only recently started to invest in their UK FTSE 100 tracker VUKE but intend to increase this as I reduce my exposure to UK single stocks and reduce my overall number of holdings (long story but like others who have commented on here I have changed my opinion about the benefits of holding a HYP). I already have a reasonable position in the ishares equivalent ISF.

[kempiejon]

My SIPP is a passive collection of vanguard ETFs, as I run a HYP I have excluded VUKE as it'll duplicate my holdings. I think you should check that yield I think it is the historic figure and might be skewed by some big specials.
I did look at Vanguard high yield and value but decided against them. I hold Europe xUK, Asia xJapan and Japan, Emerging markets and USA S&P500.

[Alaric]

I think you should check that yield I think it is the historic figure and might be skewed by some big specials.

VUKE replicates the FTSE 100 share index by owning the appropriate proportions of every share included.

According to the dividenddata site, as of 9th December, the FTSE 100 yield excluding specials is 4.43% and 4.92% with them included.

https://www.dividenddata.co.uk/dividend ... alDiv=true

[TUK020]

Hi

I have recently become attracted to Vanguard's UK FTSE tracker ETF at 4.6% yield and their worldwide high yield etf. Their charges are 0.25%.

They are both low risk, very well diversified and good yields.

It moves me away from Pyad's HYP strategy but has many of the same characteristics. Am I missing some risk/problem or do others follow these ETFs

John

John,
This is really a very good mechanism to get a low cost diversification from single company risks, and also to avoid exchange rate exposure on foreign listed shares.

However, the main drawback is that the FTSE index is not very well diversified in terms of sectors - the FTSE100 is dominated by Oil, Miners, Pharma, Tobacco & Financials. It is a good strategy for the core of your portfolio, provided you have balance in the rest. Don't go 100% for it.

A secondary, but less serious, drawback is that the FTSE100 is skewed to the UK economy. About 70% of the profits are international, but this still leaves an overexposure to the UK economy - imagine the impact of a Corbyn/McDonnell government.

In summary, a core of this, but balanced with some other sectors, and some international.
Worth considering some ITs to achieve greater spread: HICL for infra, HFEL & MYI for international etc. These still are part of the FTSE, and thus avoid direct exposure to exchange rate risk.

A good question, and one that gets me wondering if I should up the % allocated to trackers.
TUK020

[Mercenary]

Hi

I have recently become attracted to Vanguard's UK FTSE tracker ETF at 4.6% yield and their worldwide high yield etf. Their charges are 0.25%.

They are both low risk, very well diversified and good yields.

It moves me away from Pyad's HYP strategy but has many of the same characteristics. Am I missing some risk/problem or do others follow these ETFs

John

Great question as I'm currently looking at their worldwide ETF (VHYL), although the following could apply to other ETF setups.

I currently have an ISA specialising in individual UK HYP type shares. I use ETFs in my (more total return) SIPP though to gain regional exposure, in addition to holding the Vanguard worldwide ETF (VWRL). I do this because I don't like the US/tech bias (at the moment) in VWRL. VHYL seems somewhat better in this regard. So I'm considering moving to VHYL.

I have one issue with this, based on my experience with once holding the iShares high yield FTSE ETF (IUKD). That seemed to invest in shares with the highest yield regardless of performance so I ended up buying yield with capital, something I have largely avoided running my own individual share HYP where I get to choose the companies and the times to buy them. I would therefore need to check the selection basis, etc for VHYL first.

My other consideration is holding individual high yield international stocks. The natural place for these would be the HYP based ISA but, as I understand it, at a cost of the irreclaimable US with-holding tax. I understand this is not the same in the SIPP. But I also understand this is not an issue for some (depending on domicile?) ETFs so again maybe best to go for something like VHYL if it contains the sort of stocks I would buy. Not keen on filling up my buy and hold SIPP with individual shares.

Then I want to buy into sectors I think will outperform growth wise by buying individual sector stocks. For that, I use a standard trading account with an appropriate (for me) asset allocation.

Note I am an active investor well versed in technicals and fundamentals, but who also appreciates the benefits of buy and hold and suitable asset allocations.

PS: I was surprised the last time I looked that the VHYL and equivalent Vanguard fund yields and performances were not that dissimilar.

[Mercenary]

My SIPP is a passive collection of vanguard ETFs, as I run a HYP I have excluded VUKE as it'll duplicate my holdings.......

Interesting as I wrestled with this, having a ISA based individual share FTSE HYP together with a more total return focused SIPP. I still included the Vanguard FTSE ETF (VUKE) in my SIPP, but with a lower allocation. My ISA is part of my Upside fund while my SIPP is part of my Floor fund. In that sense, they are somewhat different holdings as I take a higher risk/return in my ISA than I do in my SIPP. As an aside, I further diversify (institutional risk) in my SIPP by holding the iShares ISF ETF as well as VUKE.