Which Consumer Staples ETF Is the Better Investment: XLP or RSPS?

XLP and RSPS both focus on U.S. consumer staples, but XLP distinguishes itself with lower fees, better liquidity, and significantly larger assets under management.

These two funds, while both offering access to the consumer staples sector, differ in how they weigh their holdings, cost structures, and portfolio concentrations.

This analysis provides insights for investors interested in this defensive sector.

Cost and Size Overview

Beta indicates the volatility of the fund compared to the S&P 500 and is based on five years of weekly returns. One year’s return reflects total returns over the following year.

XLP is more cost-effective, with an annual fee of just 0.08%, while RSPS charges 0.40%.

The dividend yields are fairly similar, with RSPS offering a slight edge at 2.8% versus XLP’s 2.7%.

Performance and Risk Comparison

What’s Inside

The XLP has been around for about 27 years and includes 37 U.S. consumer defensive stocks.

This portfolio is exclusively focused on consumer protection, with top holdings including Walmart, Costco Wholesale, and Procter & Gamble. These companies make up a significant portion of the fund, leading to heavier reliance on its top stocks.

The market-cap-weighted strategy allows for strong liquidity and trading volume.

Conversely, RSPS also contains 37 consumer defensive stocks but allocates them nearly equally.

Its notable companies include Lamb Weston, Monster Beverage, and The Hershey Company—each accounting for around 3% of the total assets, thus reflecting a more diversified approach.

This equal weighting strategy may appeal to investors who want to avoid concentration in the largest firms.

For more on ETF investing, you can find a comprehensive guide elsewhere.

Thoughts on the Funds

Since 2006, both ETFs have trailed the S&P 500, achieving gains of 201% compared to the index’s 385% return.

In the last five years, both funds have lagged even further, with XLP up just 3% annually and RSPS down 1%, while the S&P 500 has averaged a remarkable 13% annual return.

This underperformance largely stems from their limited exposure to the tech sector, which is increasingly vital in today’s economy.

If what you’re after are stable staple stocks, XLP seems like the better option.

While RSPS’s equal weighting is theoretically sound, it somewhat overlooks the principle of investing in successful stocks while letting weaker positions slide.

Rebalancing such a portfolio feels like “watering the weeds and trimming the flowers,” in contrast to advice from investing experts.

XLP’s heavyweights, notably Walmart and Costco, arguably still provide promising growth potential moving forward.

Additionally, XLP not only has a significantly lower expense ratio but also is much larger in size, making it less risky, in my view.

Glossary

ETF: An exchange-traded fund that holds a collection of assets and is traded on stock exchanges.
Expense Ratio: The annual fee a fund charges, represented as a percentage of assets managed.
Market Cap Weighted: A strategy based on the total market value of companies in a fund.
Equal Weight: A strategy distributing similar portfolio weight to each holding, irrespective of company size.
Consumer Essentials: Companies that provide essential goods, like food and household items, regularly purchased by consumers.
Dividend Yield: The annual dividend expressed as a percentage of the current stock price.
Beta: A measure indicating how much a security’s price fluctuates compared to the overall market, usually the S&P 500.
Assets Under Management: The total market value of the assets managed by a fund for its investors.
Maximum Drawdown: The largest drop in a fund’s value from its peak to its lowest point over a given timeframe.
Liquidity: How easily assets or funds can be bought or sold without impacting their market price.
Defensive Sector: Industries that are less sensitive to economic fluctuations, similar to consumer staples.