Better Consumer Staples ETF: Vanguard's VDC vs. Invesco's RSPS

The Vanguard Consumer Staples ETF (NYSEMKT:VDC) stands out for its much lower cost, broader diversification, and stronger risk-adjusted returns compared to the Invesco S&P 500 Equal Weight Consumer Staples ETF (NYSEMKT:RSPS), though both funds focus on the U.S. consumer staples sector and offer the same yield.

Both VDC and RSPS target U.S. consumer staples stocks, but they take different approaches: VDC tracks a market-cap-weighted index with over 100 holdings, while RSPS uses an equal-weighted strategy across 36 names. This comparison looks at cost, performance, risk, and portfolio makeup to help decide which style may appeal more to investors.

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.

VDC is notably more affordable with a 0.09% expense ratio. It undercuts RSPS by about 30 basis points. Both funds offer the same 2.8% yield, so cost efficiency may be a deciding factor for long-term investors.

Performance & risk comparison

What's inside

VDC holds 103 stocks and has been running for 21.9 years. Its portfolio is heavily tilted toward consumer defensive companies, with Walmart (NASDAQ:WMT) at 14.53%, Costco Wholesale (NASDAQ:COST) at 12.00%, and The Procter & Gamble Co (NYSE:PG) at 10.09%. VDC maintains a small allocation to consumer cyclical and industrials, adding a touch of diversification beyond pure staples.

RSPS, in contrast, limits its focus strictly to consumer defensive stocks and weights all 36 holdings equally, so no single company dominates the fund. Top positions include Dollar General (NYSE:DG) at 3.58%, Dollar Tree (NASDAQ:DLTR) at 3.58%, and The Estée Lauder Co. (NYSE:EL) at 3.44%. This equal-weight approach can give more influence to smaller companies but results in less diversification compared to VDC’s broad, cap-weighted portfolio.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

While the Vanguard Consumer Staples ETF (VDC) and Invesco S&P 500 Equal Weight Consumer Staples ETF (RSPS) both provide investors with exposure to the same sector, the key differences lie in their weighting methodology, cost, and asset size.

RSPS tries to reflect what's happening in the consumer staples industry. As a result, it only contains the 36 stocks in the sector. The equal weighting used by RSPS means every holding has the same weight regardless of market cap.

Meanwhile, VDC's market-cap weighted approach results in its top holdings, such as Walmart, having a larger influence on the ETF's performance. Its more than 100 stocks gives it broader diversification than RSPS, but does not exactly reflect only the consumer staples market since it includes some stocks in other industries.

VDC is ideal for investors seeking a low cost, and is comfortable having the largest companies in the consumer staples industry having the biggest influence on the ETF's return. RSPS is for investors who truly want a good representation of only the consumer staples sector.

Glossary

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, expressed as a percentage of its current price.
Market-cap-weighted: An index or fund strategy where each holding's weight is based on its total market value.
Equal-weighted: A strategy where each security in a portfolio or index is given the same allocation.
Drawdown: The decline from a portfolio's peak value to its lowest point over a specific period.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.
Beta: A measure of a security or fund's volatility compared to the overall market, typically the S&P 500.
AUM (Assets Under Management): The total market value of assets that a fund or investment manager oversees.
Consumer staples: Companies producing essential products like food, beverages, and household goods that people buy regularly.
Consumer defensive: Stocks or sectors that tend to be stable during economic downturns because they provide essential goods.
Consumer cyclical: Companies whose sales and profits are highly sensitive to economic cycles, such as retailers and automakers.

Robert Izquierdo has positions in Walmart. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.