Consumer Staples Showdown: Is Vanguard VDC or iShares IYK the Better Buy for Investors?

The iShares US Consumer Staples ETF (NYSEMKT:IYK) and the Vanguard Consumer Staples ETF (NYSEMKT:VDC) both target the U.S. consumer staples sector, aiming to give investors exposure to companies providing essential goods.

This comparison digs into cost, performance, risk, holdings, and structure to help clarify which ETF may appeal more to different types of investors.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

IYK charges a higher fee than VDC, making VDC more affordable for cost-conscious investors. However, IYK offers a higher dividend yield, which may appeal to those seeking more income from their holdings.

Performance & risk comparison

What's inside

IYK tracks U.S. consumer staples stocks but blends in more healthcare (11%) and basic materials (2%) names than many peers. With just 54 holdings, its top positions include Procter & Gamble, Coca-Cola, and Philip Morris International. This approach could offer slightly more diversification, though it means less pure-play exposure to staples. The fund has no notable structural quirks or special features.

VDC, in contrast, is almost entirely invested in consumer defensive companies (98%), with minimal exposure to other sectors. Its portfolio spans 104 stocks, headlined by Walmart, Costco Wholesale, and Procter & Gamble. This makes VDC a more concentrated option for those specifically targeting the consumer staples sector.

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What this means for investors

Consumer staples ETFs can be smart investments for those looking to add some stability to their portfolios, especially during periods of economic uncertainty.

Both VDC and IYK provide exposure to the consumer defensive segment of the market, but VDC is more concentrated. While it holds nearly twice as many stocks as IYK, it focuses almost exclusively on consumer defensive stocks.

That narrower approach can be both an advantage and a drawback. IYK’s reach into healthcare and basic materials can increase diversification, helping mitigate some risk if consumer defensive stocks take a turn for the worse. At the same time, though, if healthcare were to experience increased volatility, VDC’s lack of exposure to that sector could give it an edge.

Performance-wise, the two funds are fairly similar. While IYK has a slight advantage with its one-year total returns, VDC has marginally outperformed over the last five years. With similar max drawdowns, the two funds are on nearly equal footing in terms of past price fluctuations.

One area they do differ significantly, though, is expense ratio. VDC offers a much lower expense ratio of 0.09% compared to IYK’s 0.38%, meaning investors will pay $9 or $38 per year, respectively, in fees for every $10,000 invested.

Both of these ETFs can be fantastic buys. Investors seeking lower fees or a pure-play on consumer staples may prefer VDC, while those preferring slightly more diversification may find that IYK is a better fit.

Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.