ETF Talk: Consumer Staples Offer Resilience

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

In the face of economic uncertainty, cautious investors can find a place of refuge in the consumer staples sector, which features companies involved in businesses such as food, beverages, tobacco, and other household items. In particular, I have my eye on the Vanguard Consumer Staples Fund (VDC). This exchange-traded fund (ETF) lets you invest in large companies, which tend to be stable performers in turbulent economic climates. Many of the fund’s holdings, e.g. Coca-Cola and Wal-Mart, provide low-cost products that help the sector deliver consistent revenues each year.

As such, the fund offers the potential for stability and capital appreciation as the American economy continues to recuperate. VDC is up 9.26%, year-to-date. Having started the year at $81.49, the fund has continued to rise steadily throughout the year, closing at $88.77 on July 10.

The Vanguard Consumer Staples ETF (VDC) seeks to track the performance of a benchmark index that measures the investment return of stocks in the consumer staples sector. Geographically, the fund is 100% invested in U.S. companies. My hope is that as the American economy begins to improve, the consumer staples sector will rise along with it.

As of May 31, VDC’s top five holdings were: Procter & Gamble Co (PG), Coca Cola Co (KO), Philip Morris Intl Inc (PM), Wal-Mart Stores Inc (WMT) and Pepsico Inc (PEP).

VDC offers investors a way to invest in domestic companies but still maintain relative stability. However, the fund is 100% invested in the consumer staples companies, which means its value is entirely at the mercy of the sector’s ups and downs.

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If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please check out my ETF Trader advisory service. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

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[youtube_sc url="http://youtu.be/oQNFFO7N2zU"] Now that we've put what has been a very eventful first half of the year behind us, it's time to turn our attention to what I call the three "E"s -- Earnings, Europe and Emerging markets. On the earnings front, we saw Alcoa (AA) kickoff earnings season with a solid revenue and earnings beat. And while the industrial commodity firm's numbers were sound, we didn't see any significant gains in the wider market because of it. In the weeks to come,

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