4 Best Consumer Discretionary ETFs for 2022

Written by Sean GraytokUpdated: 8th Aug 2022
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We have identified the four best consumer discretionary ETFs for 2022 and beyond.

Our analysis will help you determine which one is best for your portfolio.

Best Consumer Discretionary ETFs: Overview

Consumer discretionary ETFs consist of companies that offer products or services considered non-essential by consumers but desirable if their available income is sufficient to afford them.

Periods of economic growth typically increase the average consumer’s disposable income, allowing them to spend more on entertainment, high-end apparel, convenience services, leisure activities, and automobiles.

Generally speaking, consumer discretionary stocks and ETFs tend to perform well during these periods of increased spending and economic expansion.

If you’re looking to invest in this sector, consider one of the four best consumer discretionary ETFs:

  • Consumer Discretionary Select Sector SPDR Fund (XLY)
  • Vanguard Consumer Discretionary ETF (VCR)
  • Invesco Dynamic Leisure & Entertainment ETF (PEJ)
  • iShares U.S. Consumer Discretionary ETF (IYC)

Below, we will examine each of them in more detail.

Best Consumer Discretionary ETFs

#1. Consumer Discretionary Select Sector SPDR Fund (XLY)

  • 1-Year Performance: -9.00%
  • Expense Ratio: 0.12%
  • Annual Dividend Yield: 0.54%
  • AUM: $16.7 billion
  • 3 Month Avg. Volume: 6,700,000
  • Number of Holdings: 59
  • Inception Date: 1998

The Consumer Discretionary Select Sector SPDR Fund provides access to the consumer discretionary sector of the S&P 500 Index.

XLY was the first consumer discretionary ETF to hit the market, initially launching in 1998.

Since then, its assets under management have ballooned to $16.7 billion, which makes it the largest consumer discretionary ETF by a wide margin.

Here are the top industries in XLY and their corresponding weights:

  • Internet & Direct Marketing Retail (24%)
  • Automobiles (23%)
  • Hotels, Restaurants, & Leisure (19%)
  • Specialty Retail (17%)
  • Textiles Apparel & Luxury Goods (6%)
  • Multiline Retail (5%)
  • Household Durables (4%)
  • Distributors (2%)
  • Auto Components (1%)
  • Leisure Products (1%)

Unsurprisingly, the top industries in XLY correspond with the fund’s top holdings.

Amazon.com is the largest holding and makes up 25% of net assets, followed by Tesla at 20%.

So when people feel rich, they get their stuff delivered, and they buy a Tesla or two.

You have to really like Amazon.com and Tesla if you’re thinking about buying the Consumer Discretionary Select Sector SPDR Fund – about 45% of your investment will ride on these two stocks alone.

The other consumer discretionary ETFs include large allocations to Amazon and Tesla, too but to lesser degrees.

XLY Top Holdings:

  • Amazon.com (AMZN) 25.10%
  • Tesla (TSLA) 20.27%
  • Home Depot (HD) 8.28%
  • McDonald’s (MCD) 3.95%
  • NIKE (NKE) 4.44%

#2. Vanguard Consumer Discretionary ETF (VCR)

  • 1-Year Performance: -14.00%
  • Expense Ratio: 0.10%
  • Annual Dividend Yield: 0.60%
  • AUM: $5.0 billion
  • 3 Month Avg. Volume: 158,000
  • Number of Holdings: 315
  • Inception Date: 2004

The Vanguard Consumer Discretionary ETF tracks the performance of a benchmark index that measures the investment returns of stocks in the consumer discretionary sector.

Unlike XLY, the Vanguard Consumer Discretionary ETF invests in stocks outside of the S&P 500 Index, including mid, small, and even some micro-cap stocks.

XLY and VCR not only differ on the size of companies in their respective funds but the number of holdings too. There are only 59 holdings in XLY compared to 315 in VCR.

VCR is similarly concentrated in Amazon and Tesla stock despite having more constituents. These two account for 35% of the Vanguard Consumer Discretionary ETF assets.

Another similarity between VCR and XLY is their low expense ratios. These are the lowest cost discretionary ETFs on our list, which is a great characteristic for long-term investors.

VCR Top Holdings:

  • Amazon.com (AMZN) 23.11%
  • Tesla (TSLA) 13.92%
  • Home Depot (HD) 7.01%
  • McDonald’s (MCD) 4.50%
  • NIKE (NKE) 3.20%

#3. Invesco Dynamic Leisure & Entertainment ETF (PEJ)

  • 1-Year Performance: -18.00%
  • Expense Ratio: 0.55%
  • Annual Dividend Yield: 0.73%
  • AUM: $1.1 billion
  • 3 Month Avg. Volume: 311,000
  • Number of Holdings: 32
  • Inception Date: 2005

The Invesco Dynamic Leisure & Entertainment ETF exposes specific sub-industries within the consumer discretionary sector: leisure and entertainment.

It consists of 30 U.S. leisure and entertainment companies.

The top subsectors in PEJ include Hotels, Restaurants & Leisure (56%), Entertainment (23%), Food & Staples Retailing (8%), Media (7%), Interactive Media & Services (3%), and Airlines (2%).

These companies are primarily engaged in designing, producing, or distributing goods or services in the leisure and entertainment industries.

Therefore, it’s not appropriate to directly compare PEJ to one of the general ETFs from above;  PEJ is a narrow theme within the consumer discretionary sector. 

Below, we will discuss more of these thematic options in the “Alternatives to the Best Consumer Discretionary ETFs” section.

PEJ Top Holdings:

  • Live Nation Entertainment (LYV) 5.16%
  • Airbnb (ABNB) 5.21%
  • Sysco Corporation (SYY) 5.35%
  • Liberty Media Corp. (FWONA) 5.06%
  • McDonald’s Corp. (MCD) 4.95%

#4. iShares U.S. Consumer Discretionary ETF (IYC)

  • 1-Year Performance: -15.00%
  • Expense Ratio: 0.43%
  • Annual Dividend Yield: 0.50%
  • AUM: $780 million 
  • 3 Month Avg. Volume: 200,000
  • Number of Holdings: 177
  • Inception Date: 2000

The iShares U.S. Consumer Discretionary ETF provides exposure to U.S. companies that distribute food, drugs, general retail items, and media.

This ETF is more comparable to XLY and VCR from earlier.

However, it is more suitable for investors seeking less concentration in Amazon and Tesla. These two companies account for around 20% of net assets in IYC, compared to double that in XLY and VCR. 

Other prominent holdings include Home Depot, Costco, and the Walt Disney Company.

People are more likely to do home renovations, shop at membership grocers, and take trips when they feel wealthier.

iShares has another consumer discretionary ETF similar to IYC: the iShares Global Consumer Discretionary ETF (RXI).

It has similar core holdings to IYC but invests in cyclicals outside the United States too. It includes companies such as Toyota Motor Corp, Alibaba Group, and Sony.

IYC Top Holdings:

  • Amazon.com (AMZN) 14.04%
  • Tesla (TSLA) 9.40%
  • Home Depot (HD) 4.47%
  • Costco Wholesale (COST) 4.25%
  • McDonald’s (MCD) 3.97%

Alternatives to Consumer Discretionary ETFs

As promised, this section will explore the more specific ETFs within the broader consumer discretionary sector. Let’s start with the retail-focused ETFs:

  • ProShares Online Retail ETF (ONLN)
  • Amplify Online Retail ETF (IBUY)
  • VanEck Retail ETF (RTH)
  • SPDR S&P Retail ETF (XRT)
  • Global X E-commerce ETF (EBIZ)

Other investible themes include the rapidly growing video game and sports betting sector.

In addition to 1-day delivery from Amazon, it appears that discretionary income flows into Call of Duty and speculating on Monday Night Football.

Here are some of the top sports betting and gaming ETFs:

  • VanEck Video Gaming and eSports ETF (ESPO)
  • Global X Video Games & Esports ETF (HERO)
  • Roundhill Sports Betting & iGaming ETF (BETZ)
  • Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD)
  • VanEck Gaming ETF (BJK)

There are also several hotels and hospitality ETFs to consider, such as the AdvisorShares Hotel ETF (BEDZ).

Frequently Asked Questions

What is the ETF for consumer discretionary?

There are several ETFs for consumer discretionary such as the Consumer Discretionary Select Sector SPDR Fund (XLY). The Vanguard Consumer Discretionary ETF (VCR) and the iShares U.S. Consumer Discretionary ETF (IYC).

Is a consumer discretionary ETF a good buy?

A consumer discretionary ETF is a good buy during periods of economic expansions when the disposable income of consumers increases. Income growth results in more spending on traditionally non-essential goods, resulting in strong growth periods for companies in these business areas.

Is the VCR ETF good?

The VCR ETF is a good ETF if you’re looking for low-cost, diversified exposure to the consumer discretionary sector of the economy. It is highly concentrated in Amazon (AMZN) and Tesla (TSLA) but holds 315 stocks across the entire industry.

What ETF has the highest percentage of Amazon?

Consumer discretionary ETFs have the highest percentage of Amazon.com stock. Funds like the Vanguard Consumer Discretionary ETF (VCR) and the Consumer Discretionary Select Sector SPDR Fund (XLY) have +20% allocations to Amazon.

Bottom Line: Consumer Discretionary ETFs

You can generally expect these cyclicals to outperform the market during an economic upswing.

And fortunately, there are plenty of diversified options when it comes to consumer discretionary ETFs.

This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best Consumer Discretionary ETFs.

This article was updated on August 8th, 2022 to reflect the changes in performance, holdings, and other relevant characteristics of each fund analyzed. 

Sean Graytok
Sean Graytok

Sean Graytok is our Co-Founder and leading expert in investing and financial management. His work has been cited in leading industry publications, such as InvestorPlace and Business Insider. Sean is interested in the people and technologies that are improving the world.