"Despite holding household names like Walmart ( NASDAQ:WMT) and Costco ( NASDAQ:COST), the fund's high expenses, modest yield, and concentrated exposure to stocks trading near all-time highs make it a poor choice for defensive positioning in 2026. KXI's 0.39% expense ratio creates meaningful performance drag that becomes visible in recent results. The fund trailed the S&P 500 by nearly 5 percentage points over the past year, underperforming despite the defensive characteristics investors expect from consumer staples."
"The timing issue becomes clear examining KXI's largest positions. Walmart and Costco together represent 19% of the fund, creating significant concentration risk that amplifies when these stocks move. Both retailers delivered exceptional gains over the past year, with Walmart surging 30% to around $120 per share while Costco climbed near $937, raising questions about whether their best returns already occurred. These runs create valuation concerns. When defensive stocks rally this aggressively, new investors face the risk of buying at peaks with limited upside remaining."
KXI's 0.39% expense ratio imposes a material drag on returns, contributing to nearly 5 percentage points of underperformance versus the S&P 500 over the past year. The fund holds large, concentrated positions in Walmart and Costco, which together account for roughly 19% of assets and have rallied strongly, with Walmart up about 30% and Costco near $937. Heavy exposure to stocks that have already appreciated reduces the margin of safety for new buyers and limits upside potential. Continued year-to-date gains increase downside risk for investors seeking defensive positioning.
Read at 24/7 Wall St.
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