Invesco (RSPS) vs. iShares (IYK): Which Consumer Staples ETF Is Better for Investors?

The iShares U.S. Consumer Staples ETF(NYSEMKT:IYK) charges a slightly lower expense ratio than the Invesco S&P 500 Equal Weight Consumer Staples ETF(NYSEMKT:RSPS), sports a bigger asset base, and has outperformed in recent returns, but RSPS provides a narrowly higher yield and a pure consumer staples tilt.

Both IYK and RSPS target the U.S. consumer staples sector, but they take different approaches: IYK tracks a broader slice of the market and mixes in some healthcare and basic materials stocks, while RSPS equally weights only S&P 500 consumer staples names. This comparison explores their differences in cost, returns, risk, and portfolio makeup.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The one-year return represents total return over the trailing 12 months.

IYK is marginally more affordable on fees and has a lower yield. The difference in expense ratios is minor, but the yield gap is slightly more pronounced.

Performance & risk comparison

What's inside

IYK holds 54 stocks across consumer staples (85%), healthcare (11%), and basic materials (2%), offering broader sector exposure than a pure staples fund. Its largest positions are Procter & Gamble, Coca-Cola, and Philip Morris International, and it has a nearly 26-year track record. This blend may appeal to investors seeking some diversification beyond core staples.

RSPS, by contrast, focuses exclusively on S&P 500 consumer staples companies, with 100% in consumer defensive stocks. Its top holdings -- Mondelez International, Constellation Brands, and Kroger -- are each equally weighted, which helps reduce single-stock risk but can limit upside during rallies in mega-cap staples. RSPS holds 37 stocks and undergoes quarterly rebalancing.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

Over the last two decades, IYK and RSPS have delivered annualized total returns of 9.3% and 8.3%, respectively, compared to the S&P 500’s 10.4%. While this slightly lags the index, these returns are pretty impressive, considering the stable, low-beta nature of IYK and RSPS. These ETFs are well-suited for investors seeking above-average dividend yields and below-market volatility, albeit at a slightly lower return. In simplest terms, they offer a much smoother ride than the broader market.

That said, if I were forced to choose between the two ETFs, I would lean toward IYK. The iShares ETF has consistently delivered higher returns over the last two decades, five years, and one year, while experiencing a smaller drawdown. While IYK’s 2.70% dividend yield is slightly below its peer’s mark at 2.87%, it has offered slightly higher dividend growth over the last decade, increasing its payments by 9% annually compared to RSPS’s 8%.

One thing to note, however, is that while IYK holds more stocks than RSPS, it isn’t as well diversified. In fact, its top four holdings -- Procter & Gamble, Coca-Cola, Philip Morris International, and Pepsico -- account for 45% of its portfolio. Investors will want to be comfortable holding these massive consumer staples names before buying the fund. Meanwhile, RSPS allocates roughly 3% across all its holdings and rebalances quarterly. While this rebalancing increases diversification, it also weighs on returns, as the ETF perpetually adds to underperforming stocks and trims winning positions over the long term.

I’d rather let my winners keep on running, as IYK does with its four large top holdings, and that is another reason why I would lean toward choosing the promising ETF.

Josh Kohn-Lindquist has positions in Coca-Cola. The Motley Fool recommends Constellation Brands, Kroger, and Philip Morris International. The Motley Fool has a disclosure policy.