An ETF for All Seasons

07/25/2012 7:45 am EST

Focus: ETFs

Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and

One thing that never changes is people's demand for consumer staples. They may drive less or reduce their cell phone usage, but the little things in life stay constant...and they're a good place to look for profits these days, says Doug Fabian of Making Money Alert.

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 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 (KO) and Wal-Mart (WMT), 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.

The ETF seeks to track the performance of a benchmark index that measures the investment return of stocks in the consumer staples sector. VDC is up 9.26%, year-to-date.

Geographically, the fund is 100% invested in US 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 (PG), Coca Cola, Philip Morris International (PM), Wal-Mart Stores, and PepsiCo (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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