The Consumer Stables sector is composed of companies whose primary lines of business are food, beverages, tobacco and other household items. The sector is mostly associated with non-cyclical essentials for life such as food or other products that are consumed on a regular basis without too much variation.

Unlike other areas of the economy, even during economically slow times, the demand for the products made by consumer staples companies generally doesn’t slow, or at least slows less than demand for other types of goods. Some staples, like discount foods, liquor and tobacco, see increased demand during slow economic times (Investopedia).

The staples sector has therefore historically been seen as a defensive investment with low correlation to the overall market, and has generally experienced lower volatility. With that in mind, let’s meet the subject of this week’s Jem5 Investor Profile.

Meet Alan Webster

Alan is in his mid-forties and is a fairly savvy investor. He closely watches his portfolio,  which he aims to grow over the longer term. He is a little nervous about the market’s recent volatility, and feels he should adopt a more cautious approach until things settle down. He feels he should introduce some consumer staple funds into his portfolio which he knows are more non-cyclical in nature. He has a ten year investment horizon, and longer term performance is more important to him than shorter term performance. Allan is not interested in income at this stage. He decides to check which consumer staples funds are the best match for him using Jemstep.

Here are his top funds in descending order (total return figures are expressed as percentages):

Important points for Alan to note are:

Jemscore: The composite Jemscore is the same for the top two funds – either one of these funds would be an excellent choice for Alan’s profile. Both are Fidelity Funds. It’s worth noting that Fidelity Funds designated ADV are part of the Fidelity Advisor fund family, which may be sold only through investment advisors.

Risk and return: In the Fidelity stable, all the funds are equal when it comes to risk and return. These funds are all similar, and are run by the same manager, Robert Lee. As noted above, the key difference is that all the advisor funds (ADV) may only be purchased through investment advisors. The Rydex fund is only slightly less favorable when it comes to risk & return. A look at the underlying data (available on the Jemstep website) shows that although Rydex has a slightly better standard deviation (meaning it is less volatile), its returns are less than the Fidelity funds over 3, 5 and 10 years.

Fees: In addition to returns, another big differentiator between these funds relates to fees. The underlying data shows that Rydex has an expense ratio of 1.37%, while the top two Fidelity funds are each under 1%. FDIGX has an expense ratio of 0.86%, while FDFAX has an expense ratio of 0.92%. Either of these two funds are a solid fit for Alan’s needs.

In a similar position to Alan? Perhaps you should be considering these top consumer staples funds. Alternatively, log onto Jemstep and find the funds that are the best match for your own profile.

*Note: Jem 5 is a regular feature on the Jemstep blog which lists the top mutual fund ratings for a specific investor profile. For more information, read our first post in the series.

About the Author

The team at Jemstep is dedicated not only to helping you make better investments, but also to enlightening and educating you about financial markets and responsible investment decision-making that will help you achieve your financial goals faster.