Could Consumer Staple ETFs Be a Portfolio Staple?

Consumers who are worried or skeptical about the economy may want to turn to exchange traded funds (ETFs) holding stock of companies that supply household necessities.

Consumer staples include toothpaste, detergent, toilet paper and batteries. In other words, products we can’t live without. Consumer staples typically have a consistent demand, and are considered defensive investment with lower portfolio risk. No matter how tight money is, you are not likely to skimp on this stuff when money is low, much less go without it.

Could these funds benefit from those rebate checks going out? Possibly – the rising price of fuel is cutting into the funds available for these necessities. Consumers may see the extra money as an opportunity to stock up.

The St. Louis Post-Dispatch says that the best reason to invest in this sector now is if you think the economy will worsen. Keep in mind these ETFs are down for the year, yet above their 200-day moving average. The household names, such as Procter and Gamble (PG), are relied upon and are also becoming more global in their reach.

Among the ETFs that grant access to this sector are:

• Consumer Staples Select SPDR (XLP): PG 17.1%; down 1.9% year-to-date
• Vanguard Consumer Staples (VDC): PG 14.4%; down 2.6% year-to-date
• iShares S&P Global Consumer Staples (KXI): PG 9.2%; down 3.2% year-to-date
• First Trust Consumer Staples AlphaDex (FXG): PG 4.4%; down 4.9% year-to-date
• PowerShares Dynamic Consumer Staples (PSL): down 1.3% year-to-date
• Rydex S&P Equal Weight Consumer Staples (RHS): down 4.1% year-to-date

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.