There's nothing wrong with flying first class, but coach fares have looked more appealing lately. The ongoing old battle between utility and extravagance becomes clearer during tough economic times. Consumers have cut back on big ticket items like new cars and high priced vacations outside the U.S. As the shift toward utility purchasing grows, investors should consider how a basket of consumer goods could balance their portfolios.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Everyday Goods
The Consumer Staples SPDR ETF (ARCA:XLP) covers a wide range of companies that produce everyday goods like medicines, colas, household items and personal products. Most investors probably have used at least one product or service offered by one of XLP's consumer goods holdings. Procter & Gamble (NYSE:PG), Wal-Mart (NYSE:WMT) and Phillip Morris International (NYSE:PM) dominate more than one-third of the fund's portfolio. Therefore, it's time to take a look at a few of the companies that make up the XLP.

SEE: A Guide To Investing In Consumer Staples

Goods For All Occasions
Whether it's the stuffy head fever reliever, NyQuil, the specially formulated baby clothing detergent, Dreft, or the snack attack satisfier, Pringles, Procter & Gamble is there to meet many consumer needs. However, the company is down 6% over the past twelve months, while the SPDR S&P 500 Index ETF (AMEX:SPY) is down aprox 1% over the same period.

SEE: Five Ways To Find A Winning ETF

Discount Leader
One-stop shop Wal-Mart is visited weekly by more than 100 million customers worldwide. Well-placed stores, fully-stocked shelves and low prices form a triple threat against competitors who wish to beat out the retail giant in the competition for consumers, who lately have focused spending more on food and household necessities, than extravagances.

Not Altria Anymore
Philip Morris International split away from its parent company Altria (NYSE:MO) in March of 2008. Philip Morris targets its tobacco products in the European Union, the Middle East, Africa, Asia and Latin America. Philip Morris International stock has outperformed the S&P500 with a twelve month performance of 14.50%.

SEE: A Prelude To Sinful Investing

Final Thoughts
It's safe to say that the business of consumer staples and investing in them is boring to some people. The demand for these products does not swing up and down and they don't exhibit the flashy characteristics of their close relative, the consumer cyclical.

They do, however, offer investors an opportunity to diversify into a sector that is easy to understand, has a relatively low beta and a low correlation to the overall market. So the next time you go to buy a razor when the stock market is in a tailspin, take a look at the company that makes that razor: it might be a good time to buy its stock.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares JPMorgan USD Emerg Markets Bond

    Learn about the iShares JPMorgan USD Emerging Markets Bond fund, which invests in bonds of sovereign and quasi-sovereign entities from emerging markets.
  2. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
  3. Active Trading Fundamentals

    How Hedge Funds Front-Run Index Funds to Profit

    Understand what front running is, and learn how hedge funds use this investing strategy to profit from the anticipated stock buys of index funds.
  4. Mutual Funds & ETFs

    ETF Analysis: Schwab US Large-Cap

    Discover how the Schwab U.S. Large-Cap exchange-traded fund is managed, the index it tracks and the investors for which it is most appropriate.
  5. Mutual Funds & ETFs

    ETN Analysis: Rogers Intl Commodity Energy Total Return

    Learn more about the Rogers International Commodity Total Return, which is an exchange-traded note that tracks a broad index of commodity futures.
  6. Investing

    Factors Driving Kroger's Success

    Kroger’s focus on optimizing customer experience and cultivating its own product lines has proven to be successful strategy.
  7. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  8. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!