Consumer spending makes up a huge fraction of economic activity in the world, and stocks that cater to consumers successfully can be extremely lucrative for their shareholders. Investors who prefer diversified exposure to a wider range of individual stocks often turn to exchange-traded funds, and you can find several consumer goods ETFs that take similar approaches toward investing in consumer stocks. The following five consumer goods ETFs have taken in the most in assets from investors, and they offer the exposure that those looking at the consumer space want in their portfolios.

Consumer Goods ETF

Assets Under Management

Expense Ratio

5-Year Average Annual Return

Consumer Discretionary Select Sector SPDR (NYSEMKT:XLY)

$12.3 billion



Consumer Staples Select Sector SPDR (NYSEMKT:XLP)

$9.7 billion



Vanguard Consumer Staples (NYSEMKT:VDC)

$3.7 billion



Vanguard Consumer Discretionary (NYSEMKT:VCR)

$2.2 billion



Columbia Emerging Markets Consumer (NYSEMKT:ECON)

$865 million



Data source: Fund providers.

Breaking down consumer stocks

Consumer goods come in two basic categories. Consumer staples are the goods that households need, including food, beverages, and personal and household care items. The companies that produce consumer staples can count on constant demand for their products, and so the producers tend not to be as sensitive to the economic cycle as other stocks. Consumer discretionary goods are those items that consumers want but don't necessarily need if they aren't in a financial position to afford them. The companies that make consumer discretionary goods are therefore more susceptible to the ups and downs in consumer income and wealth. Automobiles, recreational goods, and durable goods such as appliances are all in the consumer discretionary realm.

The four largest ETFs in the consumer goods space divide into those two categories. The SPDR ETF offerings have more assets under management, although they also charge a slightly higher expense ratio. The Vanguard ETFs follow similar categorical divisions and have a bit lower expense ratios. Overall, their returns are relatively close to each other.

ETF mosaic.

Image source: Getty Images.

The holdings of both consumer staples ETFs concentrate largely on food retailers, beverages, tobacco, household products, and food products, with roughly equal proportions to each subsector. Among the consumer discretionary stocks, retail is a huge component, including both brick-and-mortar specialty retail and internet-based sales. Autos and household durable items are a relatively small portion of the overall picture, and the ETFs also include consumer discretionary services like media stocks. Hotels, restaurants, and leisure stocks round out the portfolios for consumer discretionary ETFs.

The main differences between the two families are the indexes they track and their respective popularity. The SPDR ETFs have higher trading volumes that can make them more suitable for those who anticipate trading on a frequent basis. The Vanguard ETFs aren't quite as popular among traders, but their lower expenses make them ideal for long-term investors who don't expect to buy and sell shares all that often.

Looking abroad

The last ETF on the list stands out from the rest because of its international focus. The Columbia Emerging Markets Consumer ETF aims to pick the budding consumer stocks of the emerging world, with large allocations to South Africa, China, India, Mexico, and Brazil. Among its top holdings are producers of beverages and automobiles, as well as internet-based retail, travel services, and media companies. Emerging markets haven't performed very well in recent years, and the ETF's performance reflects that slump. A recent bounce could point to better things to come from the international part of the consumer sector going forward.

Find the right consumer goods ETF for you

Consumer goods stocks can play a useful defensive role in your portfolio while still letting you capture potential growth opportunities from the consumer economy. These five consumer goods ETFs can give you broad exposure to all the companies that rely on the general population to buy their products, and their relative stability can make a good addition for a well-rounded investment portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.