XLP vs. IYK: A Tale of Two ETFs

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Dear reader, let us embark upon a most delightful inquiry into the realms of financial instruments, where two stalwarts of the consumer staples sector-namely, the State Street Consumer Staples Select Sector SPDR ETF (XLP) and the iShares US Consumer Staples ETF (IYK)-find themselves in a most curious contest. One might liken this to a duel between two gentlemen of the same club, yet with differing tastes in cravats and cigars.

Both funds, in their own way, seek to grant investors a slice of the consumer staples pie. Yet, XLP, that paragon of frugality, boasts a lower expense ratio and a more concentrated portfolio, while IYK, ever the broad-minded soul, spreads its wings wider, with a smattering of healthcare and basic materials to its name. A dash of variety, one might say, though not without its price.

Snapshot (cost & size)

Metric XLP IYK
Issuer SPDR IShares
Expense ratio 0.08% 0.38%
1-yr return (as of Dec 2, 2025) (5.4%) (3.9%)
Dividend yield 2.7% 2.4%
AUM $15.5 billion $1.3 billion

Beta, that most enigmatic of metrics, measures price volatility relative to the S&P 500; the 1-yr return, meanwhile, reflects the total return over the trailing 12 months. A most useful pair of companions, if one has the patience to decipher their riddles.

XLP, with its modest fee and slightly higher dividend yield, appears the more prudent choice for the frugal investor. Yet, one must not overlook the subtleties of the matter, for even a few percentage points can accumulate like a well-tended garden of compounding interest.

Performance & risk comparison

Metric XLP IYK
Max drawdown (5 y) (17.8%) (16.3%)
Growth of $1,000 over 5 years $1,167 $1,239

What’s inside

IYK, that intrepid explorer, ventures beyond the confines of consumer staples, allocating 12% to healthcare and 2% to basic materials. Its portfolio, comprising 55 companies, includes the venerable Procter & Gamble (PG 1.07%), the ever-reliable Coca-Cola (KO 1.78%), and the dashing Philip Morris International (PM 0.98%). A fund of considerable age, having graced the markets for over a quarter-century.

XLP, by contrast, adheres strictly to the consumer defensive sector, with 100% of its assets in that domain. Its 37 holdings include the stalwart Walmart (WMT +0.79%), the thrifty Costco Wholesale (COST +1.15%), and the aforementioned Procter & Gamble. A pure-play approach, if ever there was one, for those who wish to dine exclusively on staples.

For further guidance on ETF investing, one might consult the full guide at this link. A most useful resource, if one has the time to peruse its pages.

Foolish take

When two similar ETFs stand before us, the decision often hinges upon a delicate balance of fees, performance, and dividend yield. In this case, the disparity in fees is as stark as a well-dressed man at a garden party. IYK, with its fee more than four times that of XLP, may tempt the investor with its broader reach, yet the question remains: is the additional cost justified?

Considering the long-term and short-term performance of these two funds, it is difficult to fathom why one would opt for the pricier option. The dividend yield, too, tilts slightly in favor of XLP. Yet, as the adage goes, variety is the spice of life, and some may find the allure of IYK’s broader holdings worth the extra coin.

One notable difference lies in the sector allocation and top holdings. While both funds count Procter & Gamble among their ranks, XLP’s top two holdings-Walmart and Costco-do not grace the top 10 of IYK. An investor wary of such behemoths may find the higher fee a small price to pay for exclusivity.

In sum, one might advise the investor to scrutinize each fund’s holdings with the care of a man inspecting a fine watch. For it is in these details that the true value may lie, and the fee discrepancy may be rendered moot by the strength of the underlying assets.

Glossary

Expense ratio: The annual fee, as a percentage of assets, that a fund charges its investors. A most modest sum, in the grand scheme of things.
Dividend yield: Annual dividends paid by a fund or stock, expressed as a percentage of its current price. A measure of income, if one is so inclined.
Assets under management (AUM): The total market value of all assets managed by a fund or investment company. A reflection of its popularity, one might say.
Beta: A measure of a fund’s price volatility compared to the overall market, typically the S&P 500. A most useful, if somewhat enigmatic, metric.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period. A test of patience, if nothing else.
Consumer staples sector: Industry segment including companies that produce essential products like food, beverages, and household goods. A sector as reliable as a well-timed cup of tea.
Consumer defensive sector: Another term for consumer staples; companies whose products remain in demand during economic downturns. A most steadfast bunch.
Pure-play: An investment focused exclusively on a single industry or sector, without diversification into other areas. A bold choice, if one prefers to stick to one’s knitting.
Holdings: The individual stocks or securities owned within a fund or portfolio. The very lifeblood of an ETF.
Total return: The investment’s price change plus all dividends and distributions, assuming those payouts are reinvested. A most comprehensive measure.
ETF (Exchange-Traded Fund): A fund that trades on stock exchanges and holds a basket of securities, like stocks or bonds. A marvel of modern finance, if one is so inclined.

And thus concludes our little sojourn into the world of ETFs. May your investments be as steady as a well-kept pocket watch, and your dividends as generous as a hostess’s offering of refreshments. 📈

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2025-12-03 02:58