VDC vs. IYK: Vanguard's Structural Advantage and IYK's Defensive Twist

Vanguard Consumer Staples ETF (NYSEMKT:VDC) keeps costs low and focuses almost exclusively on consumer staples, while iShares U.S. Consumer Staples ETF (NYSEMKT:IYK) charges more, pays a bit more yield, and mixes in healthcare and materials stocks.

Both VDC and IYK target U.S. companies in the consumer staples sector, but their approaches differ: VDC is the cheaper, more concentrated option with broader coverage of staples names, whereas IYK tilts toward a slightly more diversified mix, including healthcare and basic materials. This comparison highlights how each fund’s structure and sector exposure may appeal to different types of investors.

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.

VDC is more affordable to hold, with a 0.09% expense ratio compared to IYK’s 0.38%, though IYK pays a somewhat higher dividend yield at 2.7% versus VDC’s 2.2%.

Performance & risk comparison

What's inside

IYK tracks U.S. consumer staples stocks but adds a twist, with 85% in consumer defensive, 11% in healthcare, and 2% in basic materials. The fund holds 54 stocks and has been around for nearly 26 years. Its top holdings include Procter & Gamble (NYSE:PG), Coca-cola (NYSE:KO), and Philip Morris International Inc (NYSE:PM), giving it a notable tilt toward large, established brands. There are no leverage, FX hedge, or ESG quirks to note.

VDC, in contrast, keeps its portfolio tightly focused: 98% in consumer defensive, just 1% in consumer cyclical, and 0% in industrials. It holds 103 stocks, spreading exposure across the sector, with Walmart Inc (NASDAQ:WMT), Costco Wholesale Corp (NASDAQ:COST), and Procter & Gamble Co. (NYSE:PG) as its largest positions. The fund’s strict staples orientation could appeal to those seeking pure-play sector exposure.

What this means for investors

These two funds look similar on the surface — both track U.S. consumer staples, both hold the same household names at the top — but the gap between them runs deeper than the fee table suggests. VDC's cost advantage isn't just about what's inside the fund. Vanguard's ownership structure and VDC's significantly larger asset base both contribute to keeping fees low, which is a durable advantage that doesn't go away over time.

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What IYK offers in return is a broader defensive mix. The 11% healthcare allocation isn't random — healthcare shares consumer staples' defensive characteristics, and both sectors tend to hold up during downturns because demand is relatively inelastic. In that sense IYK is less a staples fund that wandered into healthcare and more a broader defensive equity play that happens to be labeled consumer staples.

Whether that's worth the premium depends on what you're trying to do. If you already have healthcare exposure elsewhere, IYK's drift adds overlap you may not want. If you're looking for a single defensive sleeve that covers more ground, the mix might suit you — but it's worth tracking over time whether that added complexity actually delivers enough to justify paying the premium over VDC's expense ratio.

Seena Hassouna has positions in Costco Wholesale. 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.