Which Is the Better Consumer Staples ETF, Vanguard's VDC or iShares' KXI?

Choosing between the iShares Global Consumer Staples ETF (NYSEMKT:KXI) and Vanguard Consumer Staples ETF (NYSEMKT:VDC) comes down to geographic preference, as KXI offers international diversification while VDC concentrates on U.S. markets.

Both funds target the essential goods sector, shielding investors with companies that provide products consumers buy regardless of economic conditions. While VDC focuses on the domestic landscape, KXI expands its reach to include global giants, providing a broader footprint at a different cost structure.

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. Dividend yield is the trailing-12-month distribution yield.

VDC is significantly more affordable with an expense ratio of 0.09%, compared to 0.39% for KXI. This cost gap remains a primary differentiator for long-term investors seeking low-overhead exposure to the essential goods sector.

Performance & risk comparison

What's inside

The iShares Global Consumer Staples ETF holds 92 positions, offering exposure primarily to consumer defensive stocks at 97% and consumer cyclicals at 3%. Its largest positions include Walmart (NASDAQ:WMT) at 8.32%, Costco Wholesale (NASDAQ:COST) at 7.16%, and Procter & Gamble (NYSE:PG) at 5.98%. It was launched in 2006. The iShares Global Consumer Staples ETF has paid $1.61 per share over the trailing 12 months, which on its recent ~$69.08 share price works out to a 2.40% yield.

The Vanguard Consumer Staples ETF tracks 103 holdings, concentrated in consumer defensive names at 97%, with minor tilts toward industrials at 1% and cyclicals at 1%. Top holdings include Walmart at 14.49%, Costco at 11.83%, and Procter & Gamble at 8.69%. The fund was launched in 2004. The Vanguard Consumer Staples ETF has paid $4.80 per share over the trailing 12 months, which on its recent ~$230.45 share price works out to a 2.10% yield.

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What this means for investors

Investing in consumer staples ETFs provides an efficient way to add defensive stocks to your portfolio. In weighing whether to choose the iShares Global Consumer Staples ETF (KXI) or the Vanguard Consumer Staples ETF (VDC), both share similarities in terms of dividend yield and top holdings. Their differences are what investors want to consider in the context of their portfolio goals.

KXI is appealing in that it delivers global exposure to the consumer staples sector. This gives you holdings in businesses that are not in VDC. That said, nearly 60% of the fund is comprised of U.S.-based companies with the U.K. second at 12%. KXI is also subject to foreign currency exchange risk, and of course, it's much higher expense ratio eats into the benefit of its slightly higher dividend yield.

VDC focuses its holdings strictly on the U.S. market, making it an investment in the American economy. This helped it deliver a lower max drawdown over the past five years, although it can be a downside as it misses out on the growth potential of international consumer brands. Even so, for cost conscious investors preferring a “set it and forget it” mindset, VDC is the clear choice given its lower expense ratio and much higher AUM, which means tighter bid-ask spreads, saving you money on every transaction.

Robert Izquierdo has positions in Walmart. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.