Choosing Between XLP and RSPS: Which Consumer Staples ETF Aligns with Your Investment Strategy?

Understanding the Two Approaches

The State Street Consumer Staples Select Sector SPDR ETF (NYSEMKT: XLP) and the Invesco S&P 500 Equal Weight Consumer Staples ETF (NYSEMKT: RSPS) both provide exposure to the U.S. consumer staples sector, yet they employ fundamentally different weighting philosophies. XLP follows a market capitalization-weighted model that favors larger companies, while RSPS embraces an equal-weight approach where each of its 38 holdings receives equivalent portfolio allocation. Understanding these structural differences is essential for determining which fund suits your portfolio objectives.

Cost Efficiency: Where XLP Pulls Ahead

When examining ongoing expenses, the cost advantage clearly favors XLP. The fund charges a mere 0.08% annual expense ratio, substantially lower than RSPS’s 0.40% fee structure. For investors managing larger positions, this 0.32% differential compounds significantly over time. Both funds maintain comparable dividend yields around 2.7% to 2.8%, meaning the real distinction lies in operational costs rather than income generation.

XLP’s substantially larger asset base—$15.5 billion compared to RSPS’s $237.2 million—translates to superior trading liquidity, making it particularly advantageous for institutional investors or those executing sizable transactions.

Portfolio Holdings: Scale vs. Diversification

The composition of these funds reveals their strategic divergence. XLP concentrates on sector heavyweights, with top positions including Walmart (NYSE: WMT), Costco Wholesale (NASDAQ: COST), and Procter & Gamble (NYSE: PG). This concentration in blue-chip retailers and household product manufacturers means that performance hinges substantially on these market leaders’ success.

RSPS takes an alternative route. Its equal-weight methodology ensures that smaller and mid-sized operators receive equivalent representation. The fund’s largest holdings—Monster Beverage (NASDAQ: MNST), Bunge Global (NYSE: BG), and Dollar Tree (NASDAQ: DLTR)—typically occupy marginal roles in cap-weighted funds. This structure appeals to investors seeking reduced exposure to consumer staples meaning concentrated holdings among industry titans.

Performance and Risk Assessment

Over a five-year horizon, XLP has delivered superior absolute returns. A $1,000 investment in XLP grew to $1,186, whereas the same allocation to RSPS reached only $990. XLP also exhibited lower maximum drawdown at 16.32% versus RSPS’s 18.61%, suggesting marginally improved downside protection during market stress.

Recent performance data underscores this divergence. XLP declined 4.5% over the trailing twelve months, while RSPS experienced a steeper 6.6% decline. The performance gap reflects XLP’s favorable weighting toward large retailers that have shown relative resilience despite macroeconomic headwinds.

Risk Profile and Market Behavior

Both funds operate with relatively modest beta values—XLP at 0.46 and RSPS at 0.41—indicating lower volatility relative to the broader S&P 500. This characteristic aligns with consumer staples’ traditional defensive positioning. However, recent market dynamics have challenged the sector’s protective qualities. Inflationary pressures and tariff-related concerns have pressured staples stocks, while limited participation in the artificial intelligence investment wave has contributed to sector underperformance.

Which Fund Fits Your Investment Profile?

For cost-conscious and liquidity-focused investors: XLP represents the superior choice. Its negligible expense ratio and deep trading volume make it ideal for building substantial positions without incurring hidden costs through bid-ask spreads or market impact.

For investors seeking broader sector exposure: RSPS merits consideration if your strategy emphasizes small- and mid-cap opportunities. The equal-weight approach provides meaningful exposure to companies that occupy secondary positions in market-cap-weighted alternatives. If you believe capital may rotate toward this segment amid changing risk appetites, RSPS could offer asymmetric upside potential.

For defensive positioning: Both funds serve defensive purposes within a diversified portfolio. The consumer staples sector’s essential nature means demand remains relatively stable during economic downturns. However, recent underperformance suggests valuations may have adjusted to reflect both defensive characteristics and reduced growth prospects relative to technology-focused holdings.

The Bottom Line

XLP’s combination of rock-bottom fees, exceptional liquidity, and superior recent returns make it the pragmatic choice for most investors seeking consumer staples sector exposure. However, RSPS warrants examination for those specifically targeting mid-cap consumer staples companies. The decision ultimately hinges on whether you prioritize cost minimization and established large-cap exposure or seek meaningful representation among emerging names within the consumer staples meaning ecosystem. Given current market dynamics and fee structures, XLP’s advantages appear decisive for mainstream investors.