State Street vs. First Trust: Contrasting ETFs in Defensive Staples
By John Nada·Jun 20, 2026·5 min read
State Street and First Trust offer contrasting ETFs in ETFs: broad vs. focused. Investors must choose between cost and strategy.
Two exchange-traded funds (ETFs) offer distinct approaches for investors seeking the defensive nature of consumer staples, but their strategies couldn't be more different.
The State Street Consumer Staples Select Sector SPDR ETF (NYSEMKT:XLP) and the First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG) are both built on the notion that consumer staples can anchor a portfolio during market turbulence. But while the State Street fund opts for broad exposure with a low expense ratio of 0.08%, according to Yahoo Finance, the First Trust fund takes a more focused approach, leveraging smart-beta selection criteria with a significantly higher expense ratio of 0.6%.
State Street's ETF follows a market-cap-weighted index of S&P 500 staples. Its top holdings include industry giants like Walmart, Costco, and Procter & Gamble. Launched in 1998, the fund has established itself with a substantial dividend yield and low costs that make it appealing for long-term investors.
This ETF's strategy is rooted in providing broad exposure to the consumer staples sector, which is predominantly composed of companies that produce or sell essential products. These products are typically less susceptible to economic cycles as they include everyday items such as food, beverages, and household goods. By mirroring the S&P 500's consumer staples index, the State Street fund offers a comprehensive view of the sector's performance.
The fund's largest positions, Walmart, Costco, and Procter & Gamble, reflect its investment in companies with strong market positions and resilient business models. Walmart, with its extensive retail network, has consistently been a dominant player in the consumer goods sector. Its business model, focusing on low-cost, high-volume sales, allows it to maintain stable revenue streams even in times of economic uncertainty.
Costco, known for its membership-only warehouse clubs, has also proven to be a robust performer in the consumer staples sector. The company's emphasis on bulk sales and competitive pricing attracts a loyal customer base, further bolstering its financial stability. Similarly, Procter & Gamble, a leading manufacturer of household and personal care products, benefits from strong brand recognition and a diverse product portfolio.
On the other hand, the First Trust fund tracks the Nasdaq U.S. Smart Food & Beverage Index, which considers volatility and growth to adjust component weightings. Its holdings focus more narrowly on companies like Archer-Daniels-Midland and Mondelez International. With a launch in 2016 and a narrower sector focus, it provides a slightly higher dividend yield but at a cost.
The First Trust ETF's approach to investing in consumer staples is markedly different from that of State Street. By focusing on the food and beverage subsector, it targets companies that play a crucial role in the global food supply chain. Archer-Daniels-Midland, a major player in agricultural processing, is one of the fund's top holdings. The company's activities in corn, oilseeds, and wheat processing are essential to food production and distribution.
Similarly, Mondelez International, another significant holding, is a global leader in the snack food industry. Its portfolio includes well-known brands such as Oreo, Cadbury, and Toblerone, which enjoy high consumer demand across different markets. The inclusion of companies like Archer-Daniels-Midland and Mondelez International underscores the First Trust fund's emphasis on growth potential and market volatility within the food and beverage sector.
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In terms of cost, the First Trust fund's expense ratio is significantly higher at 0.6%, compared to State Street's 0.08%. This cost difference is a critical consideration for investors, particularly those focused on maximizing long-term returns. The higher expense ratio is partly due to the fund's smart-beta strategy, which involves more complex selection criteria and frequent rebalancing to account for volatility and growth factors.
The dividend yields of both funds also differ slightly. The First Trust fund offers a trailing-12-month dividend yield of 2.7%, marginally higher than the 2.6% yield provided by the State Street fund. Although the difference might seem negligible, it could impact an investor's total returns over a prolonged period.
State Street's ETF, with its broader market scope and lower cost, generally appeals to investors seeking stability and long-term growth. Its low expense ratio makes it an attractive option for those who prefer a passive investment strategy, focusing on consistent returns with minimal management fees. The fund's substantial dividend yield further enhances its appeal to income-focused investors, offering regular income streams alongside capital appreciation.
Conversely, the First Trust ETF's smart-beta approach caters to investors looking for a more dynamic investment strategy. By targeting specific factors such as volatility and growth, the fund aims to outperform traditional market-cap-weighted indices, albeit at a higher cost. This strategy may appeal to investors willing to pay a premium for potential higher returns, despite the associated risks.
Performance-wise, both ETFs have demonstrated resilience during periods of market volatility. The State Street fund's diversification across a broad range of consumer staples companies provides a buffer against market downturns, as the sector's essential products remain in demand regardless of economic conditions.
Meanwhile, the First Trust fund's focus on the food and beverage subsector offers a unique advantage. The global demand for food and beverage products tends to be relatively inelastic, meaning that consumer spending in this area remains stable even during economic slowdowns. This characteristic can provide a degree of protection against broader market fluctuations.
Ultimately, the choice between State Street and First Trust comes down to an investor's priorities. Those seeking low-cost, broad exposure to the consumer staples sector may favor the State Street ETF. Its established track record and stable dividend yield align with the goals of many conservative investors looking for steady growth.
In contrast, investors interested in a more targeted approach with the potential for higher returns might consider the First Trust ETF. Its smart-beta strategy and focus on growth and volatility factors could offer opportunities for capital appreciation, especially in a dynamic market environment.
As with any investment decision, it's crucial for investors to conduct thorough research and consider their risk tolerance, investment objectives, and time horizon. Understanding the nuances of each ETF's strategy and cost structure can help investors make informed choices that align with their financial goals.