What to Expect This Summer
So, what are you really looking forward to as summer approaches? Are you bracing for those hot, sticky days? Maybe you’ve got some time planned to work in the garden. Or perhaps you’re sensing an economic downturn on the horizon? With the stock market having performed so well over the last decade, it might be due for a little pause soon.
If a slowdown is on its way, one option to consider is the Vanguard Consumer Staples Index Fund ETF. This fund focuses on essential goods—products that people buy regardless of economic conditions.
Understanding the Vanguard Consumer Staples Index Fund ETF
Now, the Vanguard Consumer Staples Index Fund ETF, also known as MSCI US Investable Market Consumer Staples 25/50, targets companies providing daily necessities. It’s classified as an exchange-traded fund (ETF), meaning it operates like stock. You can buy or sell shares at any moment during the trading day, unlike mutual funds, which only process trades once daily.
A key feature to note is its low expense ratio, just 0.09%. For every $10,000 you invest, that comes out to a mere $9 in fees.
Here’s a quick overview of recent performance:
|
Investment horizon |
Average annual return |
|---|---|
|
1 year |
5.4% |
|
3 years |
8.69% |
|
5 years |
6.83% |
|
10 years |
9.84% |
The ETF consists of around 104 different stocks, with the top 10 holdings making up about 65% of its value:
|
Company |
Recent weighting |
|---|---|
|
walmart |
16.15% |
|
costco wholesale |
12.26% |
|
procter and gamble |
9.12% |
|
coca cola |
8.34% |
|
pepsico |
4.53% |
|
philip morris international |
4.16% |
|
altria group |
3.92% |
|
mondelez international |
2.59% |
|
colgate palmolive |
2.15% |
|
target |
1.99% |
Reasons to Consider This ETF
If you’re not keen on the fact that the top 10 holdings dominate the fund’s overall value, that’s a fair concern. You might want to look at the Invesco S&P 500 Equal Weight Consumer Staples ETF, which has about 36 companies distributed more evenly but tends to yield lower returns than Vanguard’s option.
Companies in this ETF may indeed be large, but that often means they can continue to grow. If we circle back to that potential recession, think about how consumers might behave. When wallets are tight, they often turn to budget-friendly stores like Walmart or stock up on essentials at Costco. Items like toothpaste, diapers, or even cigarettes still find their way into shopping carts, and favorite snacks and beverages won’t be skipped either.
While the Vanguard Consumer Staples Index Fund ETF might not skyrocket in growth, it’s generally more stable during market dips. Plus, it offers a dividend, with a current yield of about 2.1%.
