A Prudent Examination of Staple Investments

by

The discerning investor, ever mindful of securing a comfortable future, finds herself frequently presented with choices. Two funds, the State Street Consumer Staples Select Sector SPDR ETF (identified by the somewhat vulgar designation of XLP) and the Fidelity MSCI Consumer Staples Index ETF (FSTA), both offer a pathway to participation in those essential provisions which sustain society, yet each possesses qualities which demand a careful consideration. One might observe that selecting between them is not unlike arranging a suitable match – a matter of compatibility, temperament, and a judicious assessment of long-term prospects.

Both funds, it is to be understood, are designed to provide exposure to those companies which furnish the necessities of life – victuals, household comforts, and those personal refinements which distinguish a civilized existence. This examination will endeavor to elucidate their respective merits, considering their cost, performance, and the subtle distinctions in their portfolios, that the investor may determine which best aligns with a defensive allocation of capital.

A Comparative Glance

Metric XLP FSTA
Issuer SPDR Fidelity
Expense Ratio 0.08% 0.08%
1-yr Return (as of 2026-02-06) 10.7% 9.4%
Dividend Yield 2.4% 2.1%
AUM $16.7 billion $1.4 billion

It is understood that Beta measures the susceptibility of a fund’s price to fluctuations in the broader market; a lower figure indicating a degree of stability. The one-year return, of course, reflects performance over the preceding twelve months.

Both funds prove equally economical in terms of expense, yet XLP’s slightly more generous dividend yield may appeal to those investors who prioritize a regular income. Its considerably larger assets under management suggest a degree of liquidity which could be advantageous, though one might also observe that such size can sometimes impede agility.

A Study of Performance and Risk

Metric XLP FSTA
Max Drawdown (5 y) -16.31% -16.59%
Growth of $1,000 over 5 years $1,332 $1,381

Over the past five years, both funds have weathered market turbulence with a commendable degree of resilience. FSTA, whilst exhibiting a marginally greater drawdown, has demonstrated a slightly superior cumulative growth. XLP’s substantial assets may contribute to its stability, whilst FSTA’s lower Beta suggests a degree of caution which may appeal to the more conservative investor.

The Composition of Portfolios

FSTA follows the performance of the MSCI USA IMI Consumer Staples 25/50 Index, encompassing 96 stocks across the consumer defensive, consumer cyclical, and a modest portion of the industrial sectors. Its leading holdings include Costco Wholesale, Walmart, and Procter & Gamble, a fund which has been in operation for over twelve years. The broader scope of its holdings may offer a degree of diversification, though the majority of assets remain concentrated in the largest and most established companies.

XLP, by contrast, focuses exclusively on the consumer defensive sector, comprising 36 holdings also led by Walmart, Costco, and Procter & Gamble. This fund is considerably larger in terms of assets under management and possesses no unusual features, representing a straightforward investment in the sector’s most prominent names.

For further guidance on ETF investing, one might consult the comprehensive guide available at [link omitted – a prudent investor conducts her own research].

Considerations for the Discerning Investor

Consumer staples stocks and ETFs are, as a general rule, in greater demand during periods of market uncertainty. This is hardly surprising, as these companies provide those essential provisions which are required regardless of economic conditions.

These two ETFs, however, differ in their approach. Both seek to capture the returns of consumer staples stocks, but the SPDR offering favors large-capitalization companies, whilst the Fidelity fund casts a wider net, including smaller and mid-sized enterprises. It also employs a degree of constraint to ensure greater diversification.

This added diversification renders the Fidelity ETF a more stable and anchored investment as market conditions shift, a quality which is likely to be highly valued by those who seek a degree of security. It has also, over the past decade, achieved a slightly superior average return.

The SPDR ETF, however, does offer a marginally more generous dividend yield.

One could scarcely go wrong with either, but the Fidelity ETF stands out as a slightly more prudent choice, primarily due to its greater diversification, which has contributed to its superior performance. A judicious investor, however, will consider her own circumstances and risk tolerance before making a final decision.

Read More

2026-02-09 18:53