After the market declines of 2022 and the volatility across the first few months of 2023, many investors are focusing on defensive investments right now. And when it comes to low-risk sectors on Wall Street, there is perhaps no better example of stability and staying power than big-name consumer stocks.
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After all, goods like soap, packaged foods and household products see strong demand in any economic environment. There may not be breakneck growth here, but there also is very little chance of sales collapsing — no matter how hard times get for American consumers.
These seven exchange-traded funds are the best consumer staples ETFs. All are well-established investment vehicles that offer exposure to the sector. No matter what your goals are or what your personal risk tolerance is, it’s likely one of these funds will work for you if your goal is to invest in this sector:
| Consumer staples ETF | Assets | Year-to-date return (as of May 9) |
| Consumer Staples Select Sector SPDR Fund (ticker: XLP) | $18.9 billion | 2.7% |
| First Trust Consumer Staples AlphaDEX Fund (FXG) | $700 million | 1% |
| Vanguard Consumer Staples (VDC) | $7 billion | 3.7% |
| iShares US Consumer Staples ETF (IYK) | $1.8 billion | 1% |
| iShares Global Consumer Staples ETF (KXI) | $1.6 billion | 6.8% |
| First Trust Nasdaq Food & Beverage ETF (FTXG) | $1.0 billion | 3.4% |
| Invesco S&P 500 Equal Weight Consumer Staples ETF (RHS) | $1.1 billion | 2% |
Largest Consumer Staples ETF: Consumer Staples Select Sector SPDR Fund (XLP)
The largest as well as the cheapest consumer staples ETF on this list, XLP commands an impressive $19 billion or so in assets under management and a rock-bottom expense ratio of 0.1%, or $10 per year on every $10,000 invested. That makes it a simple and cost-effective way to play this low-risk sector. Top holdings include a who’s who of the grocery store aisles, including personal care giant Procter & Gamble Co. (PG), and soft drink icons PepsiCo Inc. (PEP) and Coca-Cola Co. (KO) at the top of the list.
Just be aware that these three stocks alone represent about 25% of total assets, so this is a top-heavy fund. In fact, there are only about 40 total holdings since XLP is limited to the largest stocks in the sector that are also S&P 500 components. But considering that those names are among the biggest and most entrenched consumer staples stocks on the planet, that may not be too much of a turn-off for investors.
Dynamic Consumer Staples ETF: First Trust Consumer Staples AlphaDEX Fund (FXG)
An active or “enhanced” ETF, this First Trust fund involves more tactical strategy than the prior fund. It also only has about 40 total holdings, but they are selected based on the broader Russell 1000 index of large U.S. stocks and a selective screening methodology to invest in the best-performing stocks.
Specifically, FXG uses growth screens like price appreciation and sales growth as well as value screens like book value and return on assets to rank the universe of consumer staples companies in the Russell 1000. It then hand-picks the ones that look best according to this system. Right now that’s $16 billion packaged foods company Lamb Weston Holdings Inc. (LW) and $10 billion distributor Performance Food Group Co. (PFGC) — two food stocks that definitely aren’t as high-profile as Coke and P&G.
There’s inherently more risk in a strategy like this that aims to chase momentum. For instance, the fund outperformed its peers on this list through March 1 but then lost its mojo and has been struggling to keep up. However, if you believe in the sector and don’t mind a spicier flavor to your consumer staples ETFs, FXG is worth a look.
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Other Consumer Staples ETFs
If you’re looking at the universe of consumer staples ETFs, there are a few more funds that may be worth considering if neither of the prior options fits your personal strategy. The following exchange-traded funds all offer exposure to the sector, and are well established with at least $1 billion in assets under management.
Vanguard Consumer Staples (VDC). With $7 billion under management, VDC comes in at No. 2 behind XLP by assets, so it’s also a popular consumer staples ETF worth considering. It also shares the rock-bottom expense ratio of just 0.1%, so it doesn’t cost you any more. What it does offer, however, is slightly broader exposure to the leading companies in the sector with about 100 total holdings. That adds up to a smaller but more diversified option to play this sector.
iShares US Consumer Staples ETF (IYK). Slightly smaller and a bit more expensive than the leaders in the space, this iShares consumer staples fund is still worth mentioning because it gets the top five-star rating from investment research firm Morningstar, and is offered by one of the largest ETF providers on the planet and could be available for trade commission-free on investment platforms like Fidelity. The same old favorites like P&G and Pepsi lead the portfolio of about 50 stocks, so if this iShares option is easier to trade in your particular brokerage account or IRA, then it’s worth consideration.
iShares Global Consumer Staples ETF (KXI). If you want a global approach, then KXI is among the best consumer staples ETFs right now. This fund is inclusive of the U.S. as well as other developed markets, with top holdings including the aforementioned domestic staples giants along with Switzerland’s Nestle SA (NSRGY) and London-based Unilever PLC (UL). Given the fact that these multinational brands are very recognizable to U.S. consumers and that these companies are bigger than some domestic staples plays, this global approach could cast a wider net — and based on the outperformance of this fund year to date, could also open the door to a bigger universe of opportunities.
First Trust Nasdaq Food & Beverage ETF (FTXG). A focused funds with only 30 holdings, this First Trust offering is among the best consumer staples ETFs to buy because it’s not interested in the tangential Philip Morris International Inc. (PM) (cigarettes are technically a “staple”) or big-box retailers like Walmart Inc. (WMT), which sells a host of items that could more fairly be described as discretionary purchases. Instead, FTXG is limited to only food and beverage companies to give a more direct and defensive play on the sector.
Invesco S&P 500 Equal Weight Consumer Staples ETF (RHS). Rounding out our lists is this “equal weight” offering that doesn’t look to play favorites and instead rebalances to keep the nearly 40 domestic consumer staple stocks in the S&P 500 at allocations of just under 3% each to add balance and diversification to the already low-risk strategy of investing in this sector. It’s the same list as some of the other funds, but it’s not as top-heavy in the big names.
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7 Best Consumer Staples ETFs originally appeared on usnews.com
