VDC vs. FSTA: Comparing Two Similar Consumer Staples ETFs

The Vanguard Consumer Staples ETF (VDC) (NYSEMKT:VDC) and the Fidelity MSCI Consumer Staples Index ETF (FSTA) (NYSEMKT:FSTA) both target U.S. consumer staples, but VDC stands out for its much larger assets under management (AUM) and longer track record.

Both funds aim to capture the U.S. consumer staples sector, making them potential core options for those seeking defensive equity exposure. This comparison looks at how FSTA measures up to VDC across cost, performance, risk, liquidity, and portfolio construction.

Snapshot (Cost & Size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

FSTA is slightly more affordable by expense ratio, but the difference is only 0.01 percentage points. Dividend yields are identical, so cost and payout are essentially a wash between the two.

Performance & Risk Comparison

What's Inside

VDC holds 107 stocks focused almost entirely on consumer defensive companies, with a tiny allocation to consumer cyclicals and industrials. Its top three holdings are Walmart (NASDAQ:WMT), Costco Wholesale (NASDAQ:COST), and Procter & Gamble (NYSE:PG), which together make up a significant portion of the portfolio. The fund has been operating for nearly 22 years, giving it a long track record, and it manages $8.3 billion in assets under management (AUM).

FSTA offers nearly identical sector exposure, with 98% in consumer defensive stocks and similar top holdings: Costco Wholesale, Walmart, and The Procter & Gamble. It holds 95 stocks and tracks the MSCI USA IMI Consumer Staples 25/50 Index. Both funds avoid quirks like leverage or ESG overlays.

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What This Means For Investors

Let's cut to the chase: These two exchange-traded funds are similar -- very similar. In fact, there are few meaningful differences between the two. For example, let's consider some of the key features of any ETF:

• Dividend yield - Both funds sport a dividend yield of 2.2%.
• Recent performance - Both funds have delivered roughly the same return over the last year -- approximately -2.5%. On a longer time horizon dating back to FSTA's inception in 2013, FSTA has delivered a compound annual growth rate (CAGR) of 8.5% and VDC has a CAGR of 8.7%.
• Both funds have similar top holdings of iconic consumer staples companies like Walmart, Costco, and Procter & Gamble.

Indeed, the funds are so similar, identifying any differences may seem like splitting hairs. However, there are a few worth noting.

For example, which each fund has a low expense ratio, but VDC is slightly lower at 0.08. FSTA's expense ratio is 0.09%.

Two other differences are time since inception and AUM. VDC was started in 2004, while FSTA began in 2013, giving VDC a leg up when comparing historical returns. Finally, VDC has a larger AUM with $7.4 billion versus $1.4 billion for FSTA. Both figures are high enough that liquidity shouldn't be an issue for investors.

In summary, while these two funds are very similar, there are differences if you look closely enough. That said, both funds are solid choices for investors contemplating a consumer-oriented ETF.

Glossary

ETF: Exchange-Traded Fund; a fund that trades on stock exchanges like a stock and holds a basket of assets.
Consumer staples sector: Industry segment focused on essential products such as food, beverages, and household goods.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: Annual dividends paid by a fund or stock divided by its current price, expressed as a percentage.
Beta: A measure of an investment's volatility compared to the overall market, often using the S&P 500 as a benchmark.
AUM: Assets Under Management; the total market value of assets a fund manages on behalf of investors.
Max drawdown: The largest percentage drop from a fund's peak value to its lowest point over a specific period.
Defensive equity exposure: Investing in stocks or funds less sensitive to economic cycles, aiming for stability during downturns.
Portfolio construction: The process of selecting and weighting assets within a fund or investment portfolio.
Track record: The historical performance and operational history of a fund or investment product.
Index: A benchmark that tracks the performance of a group of securities, often used as a standard for funds.

Jake Lerch has positions in Procter & Gamble. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.