VYMI ETF: Lasting Value in an Overvalued World

One of the largest and most consistent holdings in my non-retirement portfolio since I began investing has been the Vanguard International High Dividend Yield ETF (VYMI). This Vanguard product is designed to track the FTSE Global All Cap ex US High Dividend Yield Index, providing exposure to international stocks that offer comparatively high dividend payments. VYMI is characterized by extensive geographic and sector diversification, making it a powerful tool for global equity exposure.

While I initially favored this ETF primarily for its high dividend yield and stability, its recent capital appreciation has been remarkable. As of October 25, 2025, VYMI’s year-to-date return stood at over 26%, significantly outpacing many S&P 500-tracking ETFs in the current environment. This performance becomes even more compelling when factoring in the considerably higher dividend yield and payouts distributed by VYMI relative to its U.S. counterparts. The outperformance is particularly noteworthy as it is driven by high-yield value stocks in international markets, which are not typically expected to lead during periods dominated by U.S.-centric growth stocks.

The Appeal of Diversification and Cost

Beyond performance, the widespread diversification and low expense ratio make VYMI highly appealing. As of September 30, 2025, the ETF held positions in 1,531 stocks, with its geographic composition broadly allocated as follows:

• Europe: ~43%
• Pacific: ~26%
• Emerging Markets: ~21%
• North America (non-US): ~8%
• Other Regions: Remaining percentages

A key structural advantage is the low concentration risk. The highest percentage holding in any individual stock was 1.56% (in HSBC), demonstrating a strong commitment to index-based diversification. This structure validates the payment of management fees, as it is difficult for a retail investor to replicate this level of broad, low-concentration exposure independently. Conversely, the only structural component I view with caution is the heavy concentration in the financial sector, which constituted over 42% of the portfolio as of the same date. Given the potential for global systemic events to affect the finance industry worldwide, this sector concentration introduces a level of risk to the overall ETF composition.

As is typical of Vanguard products, VYMI offers a highly competitive expense ratio. The expense ratio was only 0.17% as of February 28, 2025, equating to just $1.70 annually for every $1,000 invested. For an investment vehicle providing this vast degree of global diversification, this low cost is highly attractive. Furthermore, my personal experience with Vanguard suggests a historical trend of periodically reducing expense ratios as assets under management grow.

Valuation and Macroeconomic Catalysts

Though I generally hesitate to invest in equities or ETFs immediately following a large price surge, I believe VYMI presents a structural exception due to its valuation. The ETF’s valuation metrics remain modest and compelling: as of September 30, 2025, its price-to-earnings (P/E) ratio was 12.7 and its price-to-book (P/B) ratio was 1.5. These figures are outstanding in the current environment, especially when compared to the escalating valuations of many alternative ETFs and growth stocks in the United States.

Should the widely discussed worldwide equity bubble materialize, these moderate valuations should provide a degree of insulation, helping to mitigate downside risk for VYMI shareholders. Additionally, this ETF serves as an excellent tool for navigating market crashes or protracted bear markets, specifically because of its consistently high, quarterly dividend payout. A steady stream of dividend income provides capital that can be immediately reinvested into VYMI or deployed to purchase other undervalued assets during periods of market volatility.

Finally, current geopolitical tensions worldwide may contribute to future growth in the regions where these stocks are based, including Europe, Canada, and Japan. Elevated global conflicts and political friction among major superpowers serve as a potent call for increased self-reliance and technological advancement across various fields in these nations. I believe these macro-level imperatives will catalyze innovation and investment, potentially correlating with sustained market outperformance from these international economies in the years to come.

As a dedicated value-oriented complement to my core S&P 500 retirement investments, VYMI provides the optimal diversification tool to access value stocks abroad and hedge against both U.S. market concentration and valuation risk.