XLP vs. RSPS: Which Consumer Staples ETF Is the Better Buy for Long-Term Investors?

The State Street Consumer Staples Select Sector SPDR ETF (XLP) and Invesco S&P 500 Equal Weight Consumer Staples ETF (RSPS) offer distinct approaches to investing in the U.S. consumer staples sector, with implications for risk and returns that investors should consider. While XLP is market-cap weighted, concentrating investments in major players like Walmart and Costco, RSPS adopts an equal-weight strategy, distributing investments more evenly across approximately 35 to 38 stocks.

This difference in weighting has led to varying performance outcomes: XLP has outperformed RSPS over the past five years, benefiting from the strong performance of sector giants. Although RSPS offers a higher dividend yield and aims for reduced concentration risk, its higher expense ratio and lackluster returns relative to XLP raise questions about its value proposition.

For investors seeking defensive allocations, XLP’s lower costs and historical performance make it a compelling choice. Conversely, RSPS may appeal to those prioritizing diversification over performance, though they should be prepared to pay a premium for that strategy.

Source: fool.com