XLP vs. RSPS: Evaluating the Performance and Cost Efficiency of Two Consumer Staples ETFs in a Defensive Market Strategy

In an era marked by economic uncertainty and volatile markets, defensive sectors like consumer staples have become critical for investors seeking stability. Two exchange-traded funds (ETFs) that offer exposure to this sector-XLP (Consumer Staples Select Sector SPDR Fund) and RSPS (Invesco S&P 500 Equal Weight Consumer Staples ETF)-present distinct approaches to cost efficiency, risk-adjusted returns, and diversification. This analysis examines their merits and drawbacks, offering insights for investors navigating a defensive market strategy.

Cost Efficiency: XLP's Low-Cost Edge

Cost efficiency remains a cornerstone of long-term investment success. XLP charges an expense ratio of 0.08%, significantly lower than RSPS's 0.40% according to a comparison analysis. This 0.32% difference may seem modest, but over time, it compounds meaningfully. For instance, an investor allocating $100,000 to XLP would save approximately $3,200 annually in fees compared to RSPS. Such savings are particularly valuable in a defensive strategy, where preserving capital is paramount.

The disparity in expense ratios also reflects the scale of the funds. XLP, with $15.5 billion in assets under management (AUM), benefits from economies of scale, whereas RSPS, with $237.2 million in AUM, incurs higher per-unit costs as shown in portfolio comparisons. This scale advantage positions XLP as a more cost-effective choice for investors prioritizing fee efficiency.

Risk-Adjusted Returns: XLP Outperforms in Turbulent Markets

Risk-adjusted returns are a key metric for defensive investing, as they balance performance with volatility. As of November 2025, XLP's Sharpe ratio of -0.11 outperforms RSPS's -0.25, indicating that XLP generates better returns relative to its risk according to analysis from AAI Investment Research. Over the past year, XLP delivered a -4.5% return, compared to RSPS's -6.6% as reported by State Street Global Advisors. While both funds underperformed the broader market, XLP's resilience underscores its appeal in a downturn.

This performance gap can be attributed to XLP's concentration in large, stable companies like Walmart and Costco, which tend to weather economic shocks better than smaller peers according to Yahoo Finance holdings data. RSPS, by contrast, allocates equal weight to 38 holdings, including smaller firms like Monster Beverage and Dollar Tree, which may amplify volatility during market stress as detailed in stock analysis.

Portfolio Diversification: RSPS's Equal-Weight Strategy

Diversification is a double-edged sword in defensive investing. XLP's market-cap-weighted structure leads to heavy concentration in its top holdings, with Walmart alone accounting for roughly 15% of the fund as shown in Yahoo Finance data. While this approach leverages the stability of industry giants, it exposes investors to idiosyncratic risks tied to a few companies.

RSPS, by contrast, employs an equal-weight strategy, allocating roughly 2.6% to each of its 38 holdings according to Sum Growth's ETF profile. This methodology reduces concentration risk, as no single stock dominates the portfolio. For example, RSPS's top 10 holdings collectively represent 29.8% of assets, compared to XLP's top 10 at over 60% as reported by State Street Global Advisors. While this diversification may dilute returns from outperforming large-cap stocks, it offers a buffer against sector-specific shocks.

Strategic Implications for Defensive Investors

The choice between XLP and RSPS hinges on investor priorities. Cost-conscious investors seeking exposure to the sector's largest, most stable companies will favor XLP, given its low fees and liquidity according to a comparison analysis. Its performance in 2025, despite a challenging market, reinforces its role as a defensive staple.

However, investors prioritizing diversification and risk mitigation may lean toward RSPS, particularly in environments where smaller consumer staples firms could outperform. Its equal-weight structure ensures that underperforming giants like Procter & Gamble do not drag down returns, while smaller holdings like Kroger and Kimberly-Clark gain proportional influence as detailed in portfolio comparisons.

Conclusion

In a defensive market strategy, XLP and RSPS represent two distinct philosophies. XLP's low cost and concentration in blue-chip names make it a compelling option for capital preservation, while RSPS's equal-weight approach offers broader diversification at the expense of higher fees. Investors must weigh these trade-offs against their risk tolerance and long-term objectives. As the consumer staples sector remains a cornerstone of defensive portfolios, both ETFs provide viable pathways-but with markedly different risk-return profiles.