Consumer discretionary exchange-traded funds (ETFs) are comprised of companies focused on providing non-essential consumer goods and services. Consumer discretionary products, which are desirable when consumers have sufficient income to purchase them, include high-end apparel, entertainment, leisure items, automobiles, and certain durable goods.

Some of the big names in the sector include Home Depot Inc. (HD), Nike Inc. (NKE), and McDonald's Corp. (MCD). For investors looking for diversified exposure to the sector, consumer discretionary ETFs represent a strong option.

Key Takeaways

  • The consumer discretionary sector outperformed the broader market over the past year.
  • The ETFs with the best 1-year trailing total return are IBUY, ONLN, and NERD.
  • The top holdings of these ETFs are class A shares of Stitch Fix Inc., Amazon.com Inc., and class B shares of Modern Times Group MTG AB, respectively.

There are 21 distinct consumer discretionary ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). The consumer discretionary sector, measured by the Consumer Discretionary Select Sector SPDR ETF (XLY), has outperformed the broader market over the past year. XLY has provided a total return of 29.8% over the past 12 months, above the Russell 1000's total return of 21.2%, as of December 11, 2020.

The best-performing consumer discretionary ETF for Q1 2021, based on performance over the past year, is the Amplify Online Retail ETF (IBUY). We examine the top 3 best consumer discretionary ETFs below. All numbers below are as of December 14, 2020.

1. Amplify Online Retail ETF (IBUY)

  • Performance over 1-Year: 116.7%
  • Expense Ratio: 0.65%
  • Annual Dividend Yield: 0.15%
  • 3-Month Average Daily Volume: 212,483
  • Assets Under Management: $1.2 billion
  • Inception Date: April 20, 2016
  • Issuer: Amplify

Amplify Online Retail ETF (IBUY) tracks the EQM Online Retail Index, which is designed to provide exposure to a subset of consumer discretionary retailers, travel sites, and other websites that derive at least 70% of their revenue from online sources. The ETF is focused on multi-cap growth stocks in the consumer discretionary sectors of developed market economies.

Of the fund's 58 holdings, about 64% operate within the traditional retail industry while 27% operate as online marketplaces, and 9% are travel-related companies. The fund's top three holdings include class A shares of Stitch Fix Inc. (SFIX), an online personal styling platform; class A shares of Qurate Retail Inc. (QRTEA), a holding company whose subsidiaries operate in the video and online commerce industries; and class A shares of Lyft Inc. (LYFT), which provides ride-hailing services.

2. ProShares Online Retail ETF (ONLN)

  • Performance over 1-Year: 107.8%
  • Expense Ratio: 0.58%
  • Annual Dividend Yield: 0.51%
  • 3-Month Average Daily Volume: 209,377
  • Assets Under Management: $809.1 million
  • Inception Date: July 13, 2018
  • Issuer: ProShares

ProShares Online Retail ETF (ONLN) tracks the ProShares Online Retail Index, which gauges the performance of retailers that primarily sell online or through other non-store channels. Focused primarily on developed markets, about 74% of the index's 26 holdings are located in the U.S. while 21% are located in China. The ETF invests in multi-cap growth companies that are involved in online retail and are reshaping the retail space.

Its top three holdings include Amazon.com Inc. (AMZN), a multinational technology company focused on e-commerce, cloud computing, and digital streaming; ADRs of Alibaba Group Holding Ltd. (BABA), a China-based multinational technology company focused on e-commerce, online financial services, and internet content services; and class A shares of Chewy Inc. (CHWY), an online retailer of pet food and other pet-related products.

3. Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD)

  • Performance over 1-Year: 88.1%
  • Expense Ratio: 0.25%
  • Annual Dividend Yield: 0.17%
  • 3-Month Average Daily Volume: 38,545
  • Assets Under Management: $56.8 million
  • Inception Date: June 4, 2019
  • Issuer: Roundhill Financial LLC

Roundhill BITKRAFT Esports & Digital Entertainment (NERD) tracks the Roundhill BITKRAFT Esports Index, which is designed to gauge the performance of globally-listed companies engaged in the eSports market. The ETF provides exposure to the eSports and digital entertainment industries, including companies involved in video game publishing, streaming networks, video game tournament and league operations, competitive team ownership, and the provision of various related hardware. The fund is comprised of companies across the market-cap spectrum and follows a blended strategy, investing in a mix of both value and growth stocks.

About 26% of its 32 holdings are based in the U.S., 25% in China, and the other 49% are based in a range of developed markets across the world. The fund's top three holdings include class B shares of Modern Times Group MTG AB (MTG.B:OME), a Sweden-based holding company engaged in eSports and gaming entertainment; class Z sponsored ADRs of Bilibili Inc. (BILI), a China-based provider of online entertainment services; and Tencent Holdings Ltd. (700:HKG), a China-based multinational technology holding company whose subsidiaries provide e-commerce, digital entertainment, payment system, and other technology services.