Is Personal Preference is the Ultimate Tiebreaker Between These Two ETFs?

Investors may find that the Vanguard Consumer Staples ETF (NYSEMKT:VDC) and the Fidelity MSCI Consumer Staples Index ETF (NYSEMKT:FSTA) offer nearly identical exposure to the defensive consumer sector at very similar prices.

Consumer staples are often viewed as a cornerstone for defensive portfolios because the products they represent -- such as food, beverages, and household goods -- remain essential regardless of economic conditions. By focusing on mature companies with reliable cash flows, these funds aim to offer lower volatility than the broader market. While both funds are managed by industry giants, they differ significantly in age and assets under management (AUM), which can impact trading liquidity and long-term track records.

Snapshot (cost & size)

FSTA is slightly more affordable with an expense ratio of 0.08%, though VDC is nearly identical at 0.09%. The 0.01 percentage-point difference in expense ratios is negligible for most portfolios, but FSTA offers a slight edge in cost efficiency. In terms of income, FSTA also edges out its competitor with a marginally higher distribution yield of 2.2% compared to 2.1% for the Vanguard fund, making it potentially more attractive for yield-focused investors.

Performance & risk comparison

What's inside

Vanguard Consumer Staples ETF (VDC) tracks an index of the consumer staples industry, primarily using full replication. Its portfolio of 103 holdings consists of businesses supplying nondiscretionary products that consumers typically buy even during economic downturns. The sector allocation is 98% in consumer defensive and 1% in consumer cyclical stocks. Its largest positions include Walmart (NASDAQ:WMT) at 13.37%, Costco Wholesale (NASDAQ:COST) at 12.02%, and Coca-Cola (NYSE:KO) at 9.65%. The fund was launched in 2004. Vanguard Consumer Staples ETF has paid $4.88 per share over the trailing 12 months, which, on its recent ~$226.4 share price, works out to a 2.1% yield.

Fidelity MSCI Consumer Staples Index ETF (FSTA) is designed to replicate the investment returns of the MSCI USA IMI Consumer Staples 25/50 Index. It holds 104 stocks, providing a slightly wider net than its Vanguard counterpart, with a sector tilt of 96% in consumer defensive, 2% in basic materials, and 1% in consumer cyclical companies. Top holdings include Walmart at 13.87%, Costco Wholesale at 11.88%, and Procter & Gamble (NYSE:PG) at 9.72%. The fund was launched in 2013. Fidelity MSCI Consumer Staples Index ETF has paid $1.18 per share over the trailing 12 months, which, on its recent ~$52.7 share price, works out to a 2.2% yield.

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Which looks like the better buy

When comparing the Vanguard Consumer Staples ETF (VDC) and the Fidelity MSCI Consumer Staples Index ETF (FSTA), investors should consider several key factors. Let's see what they tell us about each fund.

First, FSTA and VDC are ultimately quite similar in their strategies, albeit with a few notable differences. FSTA typically holds slightly fewer than 100 stocks, while VDC typically holds slightly more than 100. In turn, VDC typically owns a few more small-cap consumer staples stocks. However, in the end, these two funds are remarkably similar in their top holdings and overall strategies.

Two other important factors are historical performance and income potential. Here, again, there are many similarities between the funds. Take total returns over the last five years, for example. Both funds have generated nearly identical returns of around 42%, with a compound annual growth rate (CAGR) of about 7.35%. As for income, FSTA holds a very slight edge, with a dividend yield of 2.22% versus 2.17% for VDC.

One final factor to weigh is cost. FSTA has the slightest of advantages with an expense ratio of 0.08%, while VDC's is 0.09%.

In summary, VDC and FSTA are both ETFs focused on consumer staples stocks, and they share nearly identical profiles. Extremely cost-conscious investors may elect FSTA given its slightly lower cost profile. However, at the end of the day, selecting between these two ETFs largely comes down to personal preference. On almost all major variables, these two ETFs are two of a kind.

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