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

The Vanguard Consumer Staples ETF (NYSEMKT: VDC) and Invesco S&P 500 Equal Weight Consumer Staples ETF (NYSEMKT: RSPS) both focus on consumer staples, but VDC is much larger, carries a lower expense ratio, and weights its holdings by market cap, while RSPS uses an equal-weight approach and charges more.

Both VDC and RSPS give investors exposure to the consumer staples sector, but they approach it differently. VDC tracks a broad, cap-weighted index including over 100 stocks, while RSPS equally weights just 37 S&P 500 consumer staples names. This comparison highlights their differences in cost, recent returns, risk, and portfolio construction.

Snapshot (cost & size)

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

RSPS is more expensive to hold than VDC, charging 0.40% annually versus 0.09%, but it has delivered a slightly higher dividend yield, paying 2.6% compared to VDC’s 2.1%.

Performance & risk comparison

What's inside

RSPS tracks an equal-weighted index of S&P 500 consumer staples names, giving smaller companies a bigger role than in traditional cap-weighted funds. With 37 holdings, its largest positions recently included Bunge Global SA (NYSE:BG), Colgate-Palmolive Co. (NYSE:CL), and Church & Dwight Co Inc. (NYSE:CHD), each making up just over 3% of assets. The fund has been operating for over 19 years and holds only consumer defensive stocks, rebalancing quarterly.

VDC, in contrast, includes over 100 companies, weighting them by market cap and resulting in heavy tilts toward giants like Walmart Inc. (NASDAQ:WMT), Costco Wholesale Corp. (NASDAQ:COST), and Procter & Gamble Co. (NYSE:PG). VDC’s sector makeup is nearly all consumer defensive, with small allocations to consumer cyclical and industrials, making it more diversified by number of holdings and offering broader industry coverage within staples.

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What this means for investors

Although the Vanguard Consumer Staples ETF (VDC) and the Invesco S&P 500 Equal Weight Consumer Staples ETF (RSPS) both deliver exposure to the consumer staples sector, their approach is quite different. Those differences can be the reasons for choosing one over the other.

VDC is a much larger fund with over $9 billion assets under management (AUM). This provides a great deal of liquidity, and its more than 100 holdings offers a diverse portfolio of stocks. Its expense ratio is pretty low, and it has delivered better returns than RSPS over time. These factors make VDC a good ETF for investors who are cost conscious and prefer a “set it and forget it” mindset.

However, since VDC is weighted by market cap, the ETF’s performance is heavily tied to the biggest companies in the sector, such as Walmart. Its more diversified holdings helps to soften this drawback.

RSPS focuses on a handful of consumer staples stocks, and its equal weighting approach means no company dominates. Its higher dividend yield can appeal to income-oriented investors, although that is offset to some degree by its higher expense ratio.

VDC is the better choice for investors who like its larger AUM, broader diversification, and lower cost. RSPS is the ETF to pick if you desire a higher dividend yield and want a more balanced portfolio that doesn’t skew towards mega-cap stocks.

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