The Motley Fool's David Dierking cautions against including the Vanguard High Dividend Yield ETF (VYM) in your investment portfolio. Despite Vanguard's strong reputation and low expense ratios, the author argues this particular fund has flaws in its strategy. The fund's methodology for selecting high-yield stocks is considered too broad, potentially diluting returns for investors seeking a more focused approach.

The Vanguard ETF, with over $72 billion in assets, tracks the FTSE High Dividend Yield Index. The selection process, which includes the top 50% of stocks by indicated yield, is seen as too inclusive. The author suggests a more selective approach, either by narrowing the number of qualifying stocks or setting a yield floor. Also, the fund's cap-weighted portfolio does not emphasize dividend quality.

The article underscores the importance of a well-defined investment strategy. Dierking recommends investors seek out dividend ETFs with more targeted and thoughtful approaches. While the Vanguard fund has a low expense ratio of 0.04% and a yield of 2.3%, the author believes it's not the best option. The Motley Fool's analysts have identified alternative stocks, such as Netflix and Nvidia, that have yielded substantial returns.

The author ultimately recommends excluding the Vanguard High Dividend Yield ETF from portfolios. The analysis suggests that investors could find better returns elsewhere. The article emphasizes the importance of a targeted strategy, concluding that this Vanguard fund may not align with investors' goals. The S&P 500 has seen returns of 195% compared to the Motley Fool's 914% average return.