Vanguard Consumer Staples ETF (NYSEARCA:VDC) is not a sexy pick. Year-to-date VDC is up 8.5%. It delivers a respectable 2.8% dividend, and it has an expense ratio that is lower than 92% of its competitors.
While individual stocks are usually a better way to play the market’s dynamic forces, this ETF is a perfect choice for investors that know the value of rock-solid consumer staples stocks, but don’t want to overweight their portfolios with them while the market continues to move higher.
The VDC is a one-stop shop for the best consumer staples firms in the market. And as is typical with all Vanguard funds, its expenses are incredibly low (only 0.10%, or $10 per $10,000 invested), so more of your money is going to work for you, rather than paying your fund manager.
Remember, for a long-term holding like this ETF, expenses can add up year-over-year. It pays to consider expenses along with performance when looking at any kind of fund, whether it be an ETF, an open-end fund or a closed-end fund.
VDC is built to track the MSCI US Investible Market Consumer Staples 25/50 Index, which tracks U.S.-based small-, mid- and large-cap consumer staples firms. And it does so with great consistency across 1, 3, 5 and 10-years.
These companies are economic workhorses. They don’t get a lot of coverage until things get ugly and there’s a flight to safety. But that is why now is a good time to look at VDC. These stocks are unloved right now while everyone is chasing new market highs.
Some people consider consumer staples counter-cyclical since they really shine when the other growth stocks tank. If the economy sputters, or there’s a market correction, these stocks are the harbors in the storm.
When times are tough, consumer staples endure like few others since they are always competitive in a low margin industry. Brand loyalty is important when consumers are making hard choices on products and nickels and dimes matter.
And in good times, consumer staple brands are happy indulgences. It’s a win-win for the companies. But right now, some activist investors want more growth from consumer staples firms like PG. Some change may be merited, but it’s a sure bet that if the market corrects or some economic problem pops up, these growth-hungry investors will stop pushing so hard.
Most of these companies have weathered plenty of storms over their lifetimes and will be around even after these hedge funds disappear. For that reason, the VDC is worth looking into.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.