Personally, I was looking for more exposure to the consumer staple sector as a dividend investor, as personally, I felt I didn't have enough exposure to this sector through my individual stocks and ETFs. In my search, I couldn't find many ETFs in Europe that would track this sector and meet my criteria and at one point I came across iShares MSCI World Consumer Staples Sector UCITS ETF. I have the majority of my stock portfolio in ETFs I find them a passive way to invest money wisely and they don’t require much maintenance in terms of keeping track of stocks etc. For me, it is more of a set-and-forget approach instead of keeping track of all companies in a portfolio.
An exchange-traded fund is represented as a stock in the stock market so by holding this specific stock you are holding a basket of stocks that correspond to an index (portfolio benchmark) that it is tracking.
This is a Dividend ETF and its primary goal is to track the consumer staples sector from all over the world, at the time of writing it is paying out a dividend yield of 2.12% which is a bit low for this sector, however, this ETF was established in 2019 and I am holding this ETF for the longer term, and I am expecting to perform according to its benchmark index which is the MSCI World Consumer Staples Sector which means I expect higher returns. Nevertheless, this ETF makes up a small portion of my portfolio.
The current benchmark/portfolio
The Fund measures the performance of large and mid-capitalization stocks across developed market countries that comply with MSCI's size, liquidity, and free-float criteria. The GICS consumer staples sector currently comprises companies whose businesses are less sensitive to economic cycles. It includes manufacturers and distributors of food, beverages, and tobacco and producers of non-durable household goods and personal products. It also includes food and drug retailing companies as well as hypermarkets and consumer super centers. It would be good to investigate the benchmark in more detail and the methodology in more detail on their site.
The ETF currently holds about 107 stocks which provides more than plenty of diversification in this sector. When it comes to geographical diversification, this ETF provides exposure to many top countries around the world. The top 3 holdings are the United States at 59%, the United Kingdom at 11% and Switzerland at 9%. One thing to note is while the exposure is mainly focused on US companies, many of these large companies have exposure and revenue around the world.
When looking at ETFs I find it crucial to have a look at the top 10 holdings to get a good feeling of the ETF and to see if it fits my profile and to see if these would be companies I would invest myself in individually. In this case, the top 10 holdings are representing more than 52% of the portfolio.
The top 10 holdings:
Procter & Gamble Co. - 8%
Nestle SA - 8%
Coca-Cola Co. - 6%
Pepsico Inc. - 6%
Costco Wholesale Corp. - 5%
Walmart Inc. - 5%
Philip Morris Intl. Inc. - 4%
Unilever Plc - 3%
Loreal SA - 2%
Diageo Plc - 2%
Conclusion:
Overall, this ETF has 107 holdings, which is good considering it is a sector ETF, with that being said, this ETF will play a smaller part in my portfolio, and based on its holdings and exposure I wouldn't hold this ETF as a sole holding in my portfolio, which I understand as that is not the intention. I like the exposure to these companies, as these are staple companies I would have invested in and the exposure to the so-called sin stocks is not too high, again the fact that top 10 holdings make more than 50% of the portfolio is not a big deal for me based on my allocation and goals.
Expense Ratio
When it comes to the expense ratio, the lower the better and I would generally like to see an expense ratio below 0.5%. Overall in Europe, I find the ETFs available a bit more expensive than what is available in the United States. In this case, this ETF has an expense ratio of 0.25% which is low and therefore good.
Performance
Since this is a newer ETF the data is too new to provide a good overview. However the last 3 years the fund has increased by 24% which is good considering the sector. One thing to note relating to capital appreciation consumer staples has been performing quite well the last couple of years due to many global situations which explain the performance. However, still, this ETF has performed very well and I am confident it can still continue to grow in the future albeit not in the same manner as we have seen the past few years.
Pros
I find that there is quite some nice diversification in this fund in terms of allocation and amount of stocks.
Secondly, since it is an ETF I find it a good way to set and forget and is quite passive in nature.
Thirdly, it has historically seen good capital appreciation.
Fourthly, the top holdings are companies that I know and would like to have as part of my portfolio overall.
Finally, it has a low expense ratio for an ETF available in Europe
Cons
This is a sector ETF, which means it doesn't have many holdings, and personally wouldn't use it as a single ETF in a portfolio, however, this is not the purpose either.
Secondly, as with all funds, it is not possible to choose the individual holdings so basically whether you like a stock or not in a fund, you are holding that stock indirectly, basically you are buying the winners and losers and trying to achieve a market return based on the index.
Conclusion
I currently don't hold this ETF in my portfolio as a single ETF, more as a supplementary position. I am looking at more allocation to the consumer staples sector and based on the performance, holdings, and expense ratio I came to this ETF I am glad this ETF exists as the options are a bit limited in this sector.
Disclaimer: I am not a financial advisor, this blog is centered around my opinion and should not be viewed as legal, professional, or financial advice.
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