Two consumer staples exchange-traded funds employ fundamentally different weighting methodologies, creating distinct risk-return profiles for investors seeking exposure to the defensive sector. XLP, which uses market-capitalization weighting, concentrates 28% of its $16 billion in assets among its three largest holdings while maintaining a lower expense ratio of 0.08% annually. In contrast, RSPS employs an equal-weight strategy across 36 holdings, distributing capital more evenly and charging a 0.40% annual fee, despite managing a smaller asset base of $250 million.
Performance metrics reveal nuanced trade-offs between the two approaches over the trailing 12-month period. RSPS has delivered 1-year returns of 11.75%, outpacing XLP's 9.94% return, suggesting that the equal-weight approach's exposure to smaller consumer staples companies has provided incremental gains. However, XLP's significantly lower cost structure and substantially larger asset pool offer practical advantages in terms of liquidity and long-term cost efficiency.
Investor selection between these funds should reflect portfolio objectives regarding concentration risk and diversification. Those prioritizing exposure to established industry leaders may find XLP's market-cap approach aligned with their strategy, while investors seeking broader sector representation across a larger number of companies may view RSPS's equal-weight methodology as more suitable, despite its higher fees.