The U.S. consumer staples sector is a favored area for investors seeking stability and steady yields, represented in the market by funds such as the Vanguard Consumer Staples ETF (VDC) and the Invesco S&P 500 Equal Weight Consumer Staples ETF (RSPS). Though both target shares in consumer staples industries, they deploy differing investment strategies that influence cost, risk, and diversification.
VDC employs a market-cap-weighted approach, incorporating over 100 holdings predominantly in consumer defensive industries; notable large-cap names include Walmart, which accounts for approximately 14.5% of the fund, Costco Wholesale near 12%, and The Procter & Gamble Company at over 10%. Launched nearly 22 years ago, VDC extends some exposure to consumer cyclical and industrial stocks, imparting broader diversification beyond strict consumer staples.
RSPS, meanwhile, concentrates solely on the consumer staples sector, holding 36 stocks with an equal weighting strategy. Each constituent, regardless of company size, holds roughly the same allocation. Leading holdings such as Dollar General and Dollar Tree both represent slightly above 3.5%, while The Estée Lauder Company accounts for about 3.4%. This equal distribution reduces concentration risk but results in lesser diversification compared to VDC's broader portfolio.
When contrasting cost structures, VDC presents a markedly lower expense ratio at 0.09%, which is approximately 0.31 percentage points less than RSPS's 0.40%. Both funds distribute dividends at 2.8% yields. This cost advantage positions VDC as more efficient for long-term holders mindful of fees impacting net returns.
Risk and return metrics over recent periods further delineate the funds' profiles. Over a five-year span, VDC’s peak-to-trough drawdown stood at around -16.6%, slightly better than RSPS's -18.6%. Additionally, if $1,000 had been invested five years ago, VDC's total growth, including dividends, would now approximate $1,235, whereas RSPS would have marginally declined to $984.
Regarding volatility, Beta—a measure of price fluctuations relative to the S&P 500—shows VDC and RSPS have comparable values at approximately 0.54 and 0.52, respectively, calculated from five years of weekly returns.
Assets under management illustrate significant disparity, with VDC commanding $8.6 billion, underscoring its broad investor base and liquidity compared to RSPS's $236 million.
Choosing between VDC and RSPS fundamentally hinges on investor priorities. VDC suits those favoring broad market representation influenced by the largest consumer staples firms, coupled with low fees and more comprehensive diversification, including limited exposure to related sectors. Investors inclined toward a pure consumer staples stance, desiring equal influence across each holding irrespective of size, might prefer RSPS despite higher costs and narrower diversification.
Both funds deliver identical dividend yields, reflecting the steady income generation typical of consumer staples stocks. However, their differing structural and cost attributes drive contrasting risk-adjusted return outcomes and portfolio compositions.
In summary, investors measuring trade-offs between cost efficiency, diversification breadth, and fidelity to the consumer staples sector will find meaningful distinctions in these ETFs. VDC’s market-cap-weighted framework and sizeable asset base offer a lower-cost instrument with risk and returns favorably adjusted, while RSPS provides a more sector-pure, equal-weight exposure with smaller total assets and higher fees. Aligning the fund choice with individual investment goals and preferences is essential for optimal portfolio construction.