Fisher Investments on Consumer Staples: Global Consumer Staple Benchmarks

What's a benchmark? What does it do, and why is it necessary? A benchmark is your guide for building a stock portfolio. Fisher Investments believes you can use any well-constructed index as a benchmark—examples are in Table 4.1. By studying a benchmark's (i.e., the index's) make-up, investors can assign expected risk and return to make underweight and overweight decisions for each industry. This is just as true for a sector as it is for the broader stock market, and there are many potential Consumer Staples sector benchmarks to choose from. (Benchmarks will be further explored with the top-down method in Chapter 7.)

Differences in Benchmarks
So what does the Consumer Staples investment universe look like? Fisher Investments knows it depends on the benchmark, so choose carefully! The large-cap US Consumer Staples sector looks different from small cap, and emerging markets (EM) looks different from the developed world. Why the large-cap and developed-world bias? Much of the difference can be attributed to the vast market share and international footprint many of the world's largest Staples firms possess. Developed-world firms are big sellers to emerging markets (helping explain the relatively small Staples weighting in EM). Fisher Investments finds successful small-cap Staples firms, meanwhile, are likely to be bought by the big guys, so there's some survivorship bias. Table 4.1 shows major domestic and international benchmark indexes and the percentage weight of each sector.