6 Best Healthcare Funds and ETFs to Buy Now | Investing

If you’re thinking about adding healthcare stocks to your portfolio, the timing may be good. Institutional investors are moving back into the sector. According to a February report from PitchBook, a financial data research firm, “2026 is shaping up to be a compelling healthcare investment environment.”

Not only has merger and acquisition activity in the sector been picking up, but consumer healthcare spending is on the rise and fast adoption of artificial intelligence is driving innovation and efficiencies.

But as with any type of investment, there are ebbs and flows, even when the future may look bright. The S&P 500 Health Care sector index is down 5.1% year to date, while the broader S&P 500 is showing a gain of 8.6% as of May 20, driven by tech and energy.

Not all healthcare exchange-traded funds and mutual funds are built the same way; structural differences can produce quite different results.

“Healthcare is not just a defensive sector anymore,” says Jason Purvis, a certified financial planner at Next Phase Money Management in Houston.

“It is an aging-America investment theme,” he adds. “Baby boomers are moving into the peak years for medical spending, and healthcare costs are not exactly known for going down.”

While it’s possible to delay a purchase such as a car or vacation, that’s usually not an option when it comes to surgeries, prescriptions, cancer treatment or long-term care, Purvis adds.

Here are six healthcare funds for access to this sector:

State Street Health Care Select Sector SPDR ETF (XLV)

With $37.9 billion under management, this is the largest healthcare ETF. With an expense ratio of 0.08%, it’s a low-cost way to access the largest domestic companies in the sector. Its largest holdings are Eli Lilly and Co. (LLY), Johnson & Johnson (JNJ) and AbbVie Inc. (ABBV).

This ETF doesn’t grow as fast as some other funds that are more heavily allocated to biotech or small-cap stocks, but that makes it less risky than other choices.

“It represents an affordable buy-in to a resourceful investment product that’s consistently delivered over time,” says Ivan Marchena, senior economist at Just2Trade, a trading platform for stocks, futures, foreign exchange and bonds.

Vanguard Health Care ETF (VHT)

This ETF shows the importance of index construction, says Dan O’Rourke, CFP, director of multifamily office solutions at Strathmore Capital Advisors in Charlotte, North Carolina.

“VHT tracks the MSCI US Investable Market Health Care 25/50 Index, which gives investors exposure across large-, mid- and small-cap U.S. healthcare companies,” he says. “That means the fund is not simply a collection of the biggest pharmaceutical and managed care names. It reaches across biotechnology, medical devices, life sciences tools, healthcare equipment, services and other parts of the healthcare economy.”

That broader design can be valuable in terms of sector representation, he adds, because healthcare innovation doesn’t always start at the largest companies.

“That does not eliminate sector risk, and healthcare can still be affected by regulation, drug pricing, patent cycles, clinical trial results and politics,” O’Rourke says. “But it does create a more diversified framework than a narrower fund focused only on the largest healthcare companies.”

T. Rowe Price Health Sciences Fund (PRHSX)

This actively managed mutual fund has an expense ratio of 0.83%, higher than you’ll find with an index ETF.

For the extra fee, investors should evaluate whether an active fund outperforms an index. In some time frames, this fund delivers on that. A tilt toward small caps gives this fund a boost in certain market cycles.

“Healthcare is one of the few sectors where active management can still have a strong case,” says Victor Hernandez, managing partner at NewEra Wealth Advisors in Miami.

“Clinical trial results, regulatory outcomes, patent cycles and product pipelines can create real dispersion between winners and losers,” he adds, noting that funds like PRHSX and the Fidelity Select Health Care Portfolio (FSPHX) may be attractive for investors who want active research in a sector where security selection can matter.

“The caveat, especially for high-net-worth clients, is the mutual fund wrapper,” Hernandez says. “In taxable accounts, actively managed mutual funds can create year-end capital gains distributions, so I tend to be more comfortable using these types of strategies in retirement accounts or tax-deferred vehicles.”

iShares Biotechnology ETF (IBB) 

Biotech is a notoriously volatile part of the healthcare sector. These companies are frequently younger and still in a research and development stage, rather than more established, like the companies in the XLV ETF.

“Biotechnology-focused funds like IBB tend to behave differently than broader healthcare funds because performance is often driven by innovation cycles, clinical trial outcomes, FDA approvals and investor sentiment toward growth,” says Osman Minkara, founder and managing director at CIG Capital Advisors in Southfield, Michigan.

That can create meaningful upside potential, he adds, but it also introduces a level of volatility that investors need to be comfortable with before jumping in.

This ETF has a 24% allocation to small-cap stocks and a 12% allocation to micro-caps. That’s in keeping with the more speculative nature of biotechs as a whole, and is an indication of potential volatility.

The largest holdings are Gilead Sciences Inc. (GILD), Amgen Inc. (AMGN) and Vertex Pharmaceuticals Inc. (VRTX).

Fidelity Select Health Care Portfolio (FSPHX)

The Fidelity Select Health Care Portfolio is an actively managed mutual fund that invests in pharmaceuticals, medical-device companies and insurers. It charges an expense ratio of 0.62%.

The fund holds 140 stocks, with nearly 90% in U.S. companies. Its turnover rate is 60%, which is somewhat high but not unusual for an active fund. It has no minimum investment amount, which may be an attractive feature for new investors.

However, investors should watch for higher transaction costs, which eat into returns. In addition, it may be more suitable for a tax-advantaged account, as mutual fund trades result in taxable events for investors.

The fund’s largest positions are Eli Lilly, Danaher Corp. (DHR) and Johnson & Johnson. The top 10 holdings make up about 38% of the portfolio.

iShares Global Healthcare ETF (IXJ)

This ETF may make sense for investors who want global healthcare exposure rather than a U.S.-only allocation, Hernandez says. “Some of the most important healthcare companies are based outside the U.S., including large pharmaceutical and life sciences firms in Europe,” he notes.

U.S. stocks constitute about 70% of holdings, with Switzerland, the U.K., Japan, France and Denmark rounding out top country weightings. Top non-U.S. holdings include Swiss drugmakers Roche Holding AG (OTC: RHHBY) and Novartis AG (NVS), plus the U.K.’s AstraZeneca PLC (AZN). The fund holds 114 stocks, charges 0.4% in annual expenses and tracks the S&P Global 1200 Healthcare Sector Index.