Consumer staples refer to everyday products that people need. The sector typically performs well during market downturns. Here we'll look at the best consumer staples ETFs.
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In a hurry? Here's the list:
- XLP – Consumer Staples Select Sector SPDR Fund
- VDC – Vanguard Consumer Staples ETF
- FSTA – Fidelity MSCI Consumer Staples Index ETF
- KXI – iShares Global Consumer Staples ETF
- RHS – Invesco S&P 500 Equal Weight Consumer Staples ETF
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Introduction – Why Consumer Staples?
The Consumer Staples sector tracks companies whose primary businesses are based around food and beverages, hygiene products, household items, etc. – things that people need on an everyday basis. Think Procter & Gamble, Coca-Cola, General Mills, Johnson & Johnson, etc. Demand for products in this sector remains relatively constant and is non-cyclical, and consumers are usually unable or unwilling to stop buying these products. Demand for some staples even increases during recessions. Consequently, revenues for these companies are relatively steady even during market turmoil. As a result, this sector is typically more insulated than others during market downturns.
As such, they are considered “defensive” stocks. These stocks are also less volatile than the market as a whole, and have a comparatively low correlation to the market of roughly 0.60, offering a potential diversification benefit and volatility reduction from overweighting Consumer Staples in one's investment portfolio. Dividends from Consumer Staples stocks also tend to be healthy and steady, making them attractive to dividend investors.
Consumer Staples are an attractive sector for those seeking steady growth, healthy dividends, and low volatility. Below are the 5 best Consumer Staples ETFs.
The 5 Best Consumer Staples ETFs
Below are the 5 best Consumer Staples ETFs:
XLP – Consumer Staples Select Sector SPDR Fund
The Consumer Staples Select Sector SPDR Fund (XLP) is the most popular ETF for this market segment, with over $14 billion in assets. The fund seeks to track the S&P Consumer Staples Select Sector Index, composed of Consumer Staples stocks in the S&P 500. This ETF has 34 holdings and an expense ratio of 0.10%.
VDC – Vanguard Consumer Staples ETF
The Vanguard Consumer Staples ETF (VDC) is next in popularity, with over $6 billion in assets. The fund seeks to track the MSCI US Investable Market Consumer Staples 25/50 Index. With over 90 holdings, VDC provides broader diversification and comparatively more mid- and small-cap exposure than XLP above. This ETF also has an expense ratio of 0.10%.
FSTA – Fidelity MSCI Consumer Staples Index ETF
The Fidelity MSCI Consumer Staples Index ETF (FSTA) is somewhat in between the above two in terms of exposure. This ETF is the cheapest on the list with an expense ratio of 0.08%. The fund seeks to track the MSCI USA IMI Consumer Staples Index.
KXI – iShares Global Consumer Staples ETF
The above 3 ETFs only target Consumer Staples stocks in the United States. If you prefer to access Consumer Staples globally, the iShares Global Consumer Staples ETF (KXI) is roughly 50% exposed to the United States, with the other 50% in foreign holdings around the world. The fund seeks to track the S&P Global 1200 Consumer Staples Sector Capped Index. This broader diversification comes at a cost; this ETF has an expense ratio of 0.43%.
RHS – Invesco S&P 500 Equal Weight Consumer Staples ETF
The ETFs above are market-weighted and are thus overweight in a small handful of holdings. The Invesco S&P 500 Equal Weight Consumer Staples ETF (RHS) is equal-weighted, so each company in the fund gets equal exposure. This results in much more exposure to small- and mid-caps than the above ETFs. The fund seeks to track the S&P Equal Weight Consumer Staples Index. This ETF has 33 holdings and an expense ratio of 0.40%.
Where to Buy These Consumer Staples ETFs
M1 Finance offers all these Consumer Staples ETFs. The broker has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, and a modern, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.
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