VDC vs. RSPS: For Consumer Staples ETFs, Does Equal Weighting Beat Lower Costs?

The Vanguard Consumer Staples ETF (NYSEMKT:VDC) and Invesco S&P 500 Equal Weight Consumer Staples ETF (NYSEMKT:RSPS) both focus on the consumer staples sector, but VDC charges a fraction of the expense ratio, covers more stocks, and has outperformed RSPS over one and five years.

Both funds give investors exposure to companies that produce and sell everyday household products. This comparison looks at how RSPS’s equal-weight strategy stacks up against VDC’s market-cap-weighted approach, taking into account costs, returns, risk, and each fund’s unique characteristics.

Snapshot (cost & size)

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

VDC looks notably cheaper, charging less than a quarter of RSPS’s expense ratio, while RSPS may appeal to investors seeking a higher dividend yield.

Performance & risk comparison

What's inside

RSPS holds 35 roughly equal-weighted consumer defensive stocks, rebalancing quarterly to avoid concentration in the sector’s giants. Its largest positions, such as Brown-Forman (NYSE:BFB), Tyson Foods (NYSE:TSN), and Mondelez International (NASDAQ:MDLZ), each make up just over 3% of the portfolio. The fund sticks exclusively to consumer staples names within the S&P 500 universe.

VDC, by contrast, spreads its assets across more than 100 consumer staples companies, but is also heavily tilted toward the biggest players in the sector -- with Walmart (NASDAQ:WMT), Costco Wholesale (NASDAQ:COST), and Procter & Gamble (NYSE:PG) together representing about 36% of the portfolio. This market-cap weighting means VDC skews toward the sector’s largest and most established companies, while RSPS gives roughly equal influence to each of its holdings, preventing the sector's mega-caps from dominating returns the way they do in VDC.

What this means for investors

Consumer staples has long been considered a "defensive" sector -- one that holds up relatively well when economic uncertainty rises and consumers pull back on discretionary spending. That defensive reputation makes both VDC and RSPS worth understanding, but the two funds take meaningfully different approaches to capturing that stability.

The cost gap alone is hard to ignore. VDC's expense ratio is less than a quarter of RSPS's -- and in ETF investing, fees compound quietly over time, acting as a steady drag on long-term returns. For buy-and-hold investors, that difference can be meaningful.

The performance gap tells a similar story. VDC's one-year and five-year returns have outpaced RSPS by a notable margin, largely because its heavy weighting toward the sector’s largest companies has worked in its favor. Those mega-cap names have been consistent performers and, in Walmart and Costco's case, genuine market darlings in recent years.

RSPS isn't without its appeal. Its equal-weight structure limits concentration risk -- no single company can dominate the fund's results the way Walmart and Costco do in VDC. If a few of the mega-cap staples names were to stumble, RSPS's less top-heavy focus could act as a buffer. And for income-focused investors, RSPS's higher dividend yield may tip the scales.

The bottom line: VDC looks like the stronger choice for most long-term investors based on cost efficiency and track record. But investors who are wary of mega-cap concentration -- or who prioritize dividend income -- may find RSPS worth a closer look.

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Andy Gould has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.