Consumer staples ETFs offer investors a way to gain exposure to the defensive sector, which tends to hold up relatively well during economic downturns. Two popular options are the XLP (SPDR Exchange Traded Fund – Consumer Staples Equity ETF) and the RSPS (Invesco S&P 500 Equal Weight Consumer Staples ETF). While both funds target the same sector – companies that produce essential goods like food, beverages, and household products – their approaches to portfolio construction and expense ratios differ significantly. This comparison examines the key distinctions between XLP and RSPS, including their cost, risk profiles, and potential earnings, to help investors determine which fund aligns best with their investment goals.

Cost and Expense Ratios: XLP Offers a Significant Advantage

The most immediate difference between XLP and RSPS lies in their expense ratios. XLP boasts a considerably lower expense ratio of 0.08%, representing an annual cost of just $8 per year for every $10,000 invested. RSPS, in contrast, carries a higher expense ratio of 0.40%, equating to $40 per year for the same investment amount. These seemingly small differences in fees accumulate over time, impacting long-term investment returns. XLP’s lower cost makes it a more attractive option for investors seeking to minimize expenses and maximize returns.

Portfolio Construction: Market-Cap Weighted vs. Equal Weighting

XLP employs a market-cap weighted approach, meaning that its holdings are determined by the market value of each company within the consumer staples sector. This strategy results in substantial exposure to mega-cap staples leaders, such as Walmart, Costco Wholesale, and Procter & Gamble. RSPS, conversely, utilizes an equal-weighting methodology, giving each of its 37 holdings an identical weighting within the portfolio, regardless of size. This approach diversifies the portfolio more broadly, reducing the risk associated with over-concentration in large companies.

Risk Profiles: Assessing Volatility and Drawdowns

Analyzing the risk profiles of XLP and RSPS reveals important distinctions. XLP’s market-cap weighted approach can lead to greater volatility, as its performance is heavily influenced by the largest companies in the sector. Its maximum drawdown over the past five years is -16.32%. RSPS, with its equal weighting, generally exhibits lower volatility and a greater degree of diversification, yielding a maximum drawdown of -18.61% over the same period. The beta measure, indicating volatility relative to the S&P 500, is 0.50 for XLP and 0.52 for RSPS, demonstrating similar price volatility for both funds. The max drawdown is another good measure of risk.

Performance and Earnings Potential: Tracking Returns Over Time

Over five years, a $1,000 investment in either fund would have generated significantly different returns. An investment in XLP would have grown to approximately $1,180, while an investment in RSPS would have yielded around $992. These differing outcomes are largely attributable to the portfolio construction strategies. XLP’s concentration in high-performing mega-cap staples has driven stronger returns, while RSPS’s broader diversification has mitigated potential losses during periods of market turbulence. The 1-year return (as of December 14, 2025) has seen XLP perform at -3.19% and RSPS at -5.05%, demonstrating the different risks attached to each fund.

Key Considerations for Investors

Choosing between XLP and RSPS depends on an investor’s individual risk tolerance and investment objectives. XLP’s lower cost and potential for higher returns make it suitable for investors seeking a growth-oriented strategy within the consumer staples sector. However, its concentration in large-cap stocks necessitates a careful assessment of potential risks. RSPS’s equal-weighting approach offers greater diversification and reduced volatility, making it a more conservative option for investors prioritizing stability and a balanced portfolio. The fact that XLP is a larger fund with a higher AUM ($15.5 billion) also provides greater liquidity and ease of trading.

Concluding Remarks: Investors considering a consumer staples ETF should carefully evaluate these differences. Ultimately, the best choice hinges on an investor’s understanding of their own risk tolerance and their investment goals.