Defensive ETFs: KXI Charges Lower Fees, While FTXG Provides More Income

First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG) and iShares Global Consumer Staples ETF (NYSEMKT:KXI) differ most on cost, performance, portfolio breadth, and sector concentration, with KXI offering broader global coverage and a lower expense ratio.

Both FTXG and KXI target the defensive end of the equity market, but approach it from different angles—FTXG zeroes in on U.S. food and beverage companies, while KXI casts a global net across the entire consumer staples sector. This comparison highlights which ETF may appeal more depending on investor goals for income, diversification, and sector exposure.

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.

KXI is more affordable to own with a 0.2 percentage point lower expense ratio, and while FTXG delivers a higher dividend yield, KXI’s lower cost may appeal to those prioritizing total return over income.

Performance & Risk Comparison

What's Inside

KXI focuses on global consumer staples, spanning 96 holdings and offering exposure to household names such as Walmart Inc (NASDAQ:WMT), Costco Wholesale Corp (NASDAQ:COST), and Philip Morris International Inc (NYSE:PM). The fund maintains a 97% tilt toward consumer defensive stocks, with a minor allocation to consumer cyclicals, and has a long track record at over 19 years old. This breadth and international reach may help smooth out regional risks and sector-specific shocks.

FTXG, by contrast, is tightly concentrated with only 31 holdings, almost entirely within the U.S. consumer defensive sector and a notable food and beverage bias. Top positions include Archer-Daniels-Midland Company (NYSE:ADM), PepsiCo, Inc. (NASDAQ:PEP), and Mondelez International, Inc. (NASDAQ:MDLZ). This gives the fund a narrower focus that could appeal to investors seeking targeted exposure to American staples companies.

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What This Means For Investors

Sometimes, a dose of defensive stocks is the prescription that investors need. Whether it’s simply to balance a portfolio, or part of a more comprehensive strategy for capital preservation, there is a place for defensive stocks in many portfolios. So, for investors in need of a defensive ETF, First Trust Nasdaq Food & Beverage ETF (FTXG) and iShares Global Consumer Staples ETF (KXI) are two worth considering. Here’s how they compare.

To start, let’s note that both ETFs focus on consumer staples stocks — think big box retailers like Walmart and Costco, along with food and beverage giants like Pepsi and Mondelez. However, the funds differ in their number of holdings and their focus.

KXI, for example, holds over 90 stocks. Its expense ratio (0.39% vs. 0.60%) is lower than FTXG, but remains average-at-best among the ETF universe. In addition, KXI is significantly larger than FTXG with over $930 million in AUM (vs. only $17 million for FTXG). That could matter to investors, as KXI’s larger size provides additional liquidity for those seeking to buy or sell shares.

Turning to FTXG, its main advantage over KXI is its larger dividend yield (2.8% vs. 2.2%). For defensive-oriented investors, income generation is often an important consideration, and FTXG’s higher dividend yield means that investors should expect to generate a higher amount of income annually compared to KXI.

In summary, each fund has its points. However, KXI scores higher on several key metrics, including fees, liquidity, and diversification. That said, those investors with a pure focus on yield may still be drawn to FTXG.

Glossary

ETF: Exchange-traded fund that holds a basket of assets and trades like a stock.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund's average assets.
Dividend yield: Annual dividends per share divided by the current share price, showing income return percentage.
Beta: Measure of an investment's volatility compared with the overall market, often the S&P 500.
AUM: Assets under management; the total market value of all assets in a fund.
Max drawdown: Largest peak-to-trough decline in value over a specific period, showing worst historical loss.
Total return: Investment performance including price changes plus all dividends and distributions, assuming reinvestment.
Consumer staples sector: Companies providing essential everyday products like food, beverages, and household goods.
Consumer defensive stocks: Shares of companies whose products are consistently needed, even during economic downturns.
Consumer cyclicals: Companies whose sales typically rise and fall with the overall economy, like retailers or automakers.
Sector concentration: Degree to which a fund's holdings are focused in a particular industry or sector.
Diversification: Spreading investments across many securities to reduce the impact of any single holding's performance.

Jake Lerch has positions in Philip Morris International. 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.