The State Street Consumer Staples Select Sector SPDR ETF (NYSEMKT:XLP) and the Invesco S&P 500 Equal Weight Consumer Staples ETF (NYSEMKT:RSPS) are both focused on the U.S. consumer staples sector, but they employ different methods of portfolio construction.
When comparing these two ETFs, it is important to consider various factors such as cost, returns, risk, portfolio composition, and trading characteristics to determine which one aligns better with your investment goals.
In terms of cost, RSPS has a higher expense ratio of 0.40% compared to XLP’s 0.08%. Despite this cost difference, both funds offer similar dividend yields, providing comparable payout potential.
Looking at performance, RSPS has a slightly higher 1-year return of 11.75% compared to XLP’s 9.94%. Both ETFs also have similar beta values, indicating their price volatility relative to the S&P 500 index.
In terms of portfolio makeup, RSPS takes an equal-weighted approach, giving each of its 36 holdings an equal influence on the portfolio. In contrast, XLP tracks a market-cap-weighted index, with larger companies like Walmart, Costco Wholesale, and Procter & Gamble dominating the portfolio. While XLP offers greater liquidity and scale due to its heavy tilt towards mega-cap companies, RSPS provides more balanced exposure across the industry’s players.
Investors should also consider factors like maximum drawdown and growth over time when evaluating these ETFs. RSPS has a higher max drawdown of -18.61% compared to XLP’s -16.32%, and XLP has shown better growth over 5 years.
Ultimately, the choice between XLP and RSPS will depend on the level of exposure investors seek to major players in the industry. XLP’s market-cap-weighted approach gives greater access to industry leaders, while RSPS’s equal-weighted strategy helps reduce single-stock risk by providing more balanced exposure across all holdings.
Before making an investment decision, it is essential to conduct thorough research and consider your investment goals and risk tolerance. Both XLP and RSPS offer distinct approaches to investing in the consumer staples sector, and choosing the right one depends on your individual preferences and investment strategy.
