Healthcare is a global industry that is poised to continue growing over time as our understanding of biotechnology, pharmaceuticals, technology, and more expands. Coupled with an aging population and a need for innovative approaches to patient care, healthcare-focused Exchange Traded Funds (ETFs) are well-positioned to benefit while offering investors a way to gain diversified exposure to this critical sector, combining the benefits of mutual funds with the flexibility of stock trading.
Below, we list five of the top healthcare-focused ETFs available to investors who expect exposure to the industry to be lucrative over time.
HealthCare-Focused Exchange Traded Funds (ETFs)
*Note: ETFs are ranked by Net Assets of Funds in USD at the time of writing*
1. The Health Care Select Sector SPDR Fund
The Health Care Select Sector SPDR Fund (XLV) is an exchange-traded fund designed to provide investors with exposure to the healthcare sector of the S&P 500 Index. XLV includes a wide range of healthcare companies, including those in pharmaceuticals, biotechnology, medical devices, and healthcare providers.
Key holdings of this fund include the following companies,
- Eli Lilly & Co.
- United Health Group Inc.
- Johnson & Johnson
- Merck & Co. Inc.
- AbbVie Inc.
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| $40.21 billion | 0.09% | 11.01% | 6.20% | 10.90% |
XLV is managed by State Street Global Advisors, one of the largest asset managers in the world. State Street is known for its extensive lineup of SPDR ETFs, which offer investors a broad spectrum of investment opportunities across various sectors and asset classes.
What sets it apart from direct competitors?
- Broad Healthcare Exposure: XLV offers comprehensive exposure to the healthcare sector, covering a wide range of sub-sectors, including pharmaceuticals, biotechnology, and medical devices.
- Large Market Cap Companies: The ETF focuses on large-cap companies, providing stability and potential for steady growth.
- Low Expense Ratio: XLV has a relatively low expense ratio, making it a cost-effective option for investors seeking healthcare sector exposure.
XLV was launched in December 1998 and has become one of the most popular healthcare ETFs due to its extensive coverage of the sector and the strong performance of its underlying holdings. It is most suitable for conservative investors seeking stable, large-cap healthcare exposure with a low expense ratio.
2. Vanguard Health Care ETF
The Vanguard Health Care ETF (VHT) seeks to track the performance of the MSCI US Investable Market Health Care 25/50 Index. VHT provides broad exposure to the healthcare sector, including pharmaceuticals, biotechnology, medical devices, and healthcare providers.
Key holdings of this fund include the following companies,
- Eli Lilly & Co.
- United Health Group Inc.
- AbbVie Inc.
- Johnson & Johnson
- Merck & Co. Inc.
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| $20.3 billion | 0.10% | 10.20% | 3.92% | 10.39% |
VHT is managed by Vanguard, one of the world’s largest and most respected asset management companies. Vanguard is renowned for its low-cost investment products and commitment to investor returns.
What sets it apart from direct competitors?
- Comprehensive Sector Coverage: VHT offers extensive exposure to the healthcare sector, covering a wide range of sub-sectors and market capitalizations.
- Low Expense Ratio: Vanguard’s focus on low-cost investing is reflected in VHT’s competitive expense ratio, making it an attractive option for cost-conscious investors.
- Strong Performance History: VHT has demonstrated strong performance over time, driven by its diversified holdings and exposure to leading healthcare companies.
VHT was launched in January 2004 and has gained popularity among investors for its broad healthcare sector coverage and low expense ratio. It is ideal for cost-conscious investors looking for comprehensive sector coverage and diversified market capitalization.
3. iShares Biotechnology ETF
The iShares Biotechnology ETF (IBB) aims to track the investment results of an index composed of U.S.-listed equities in the biotechnology sector. The fund provides exposure to companies engaged in the research, development, and commercialization of new medical treatments.
Key holdings of this fund include the following companies,
- Regeneron Pharmaceuticals Inc.
- Gilead Sciences Inc.
- Amgen Inc.
- Vertex Pharmaceuticals Inc.
- Moderna Inc.
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| $7.66 billion | 0.45% | 8.42% | -5.46% | 4.96% |
IBB is managed by BlackRock, the world’s largest asset manager, known for its extensive iShares ETF lineup. BlackRock’s iShares ETFs are designed to offer investors a wide range of sector and market-specific investment opportunities.
What sets it apart from direct competitors?
- Biotechnology Focus: IBB is specifically focused on the biotechnology sector, providing targeted exposure to companies at the forefront of medical innovation.
- Leading Companies: The ETF includes holdings in some of the most prominent and innovative biotechnology companies, offering growth potential.
- High Volatility and High Reward: The biotechnology sector is known for its volatility, but also for the potential for significant gains, making IBB a suitable choice for risk-tolerant investors.
IBB was launched in February 2001 and has become a popular choice for investors seeking concentrated exposure to the biotechnology sector. It is best for aggressive investors who can tolerate high volatility for potential high rewards in the biotechnology sector.
4. iShares Global Healthcare ETF
The iShares Global Healthcare ETF (IXJ) seeks to track the investment results of an index composed of global equities in the healthcare sector. The fund provides exposure to healthcare companies worldwide, including those in pharmaceuticals, biotechnology, and medical devices.
Key holdings of this fund include the following companies,
- Eli Lilly & Co.
- United Health Group Inc.
- Novo Nordisk
- Johnson & Johnson
- Merck & Co. Inc.
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| $4.01 billion | 0.42% | 10.76% | 5.11% | 9.96% |
IXJ is managed by BlackRock, the world’s largest asset manager, known for its broad range of iShares ETFs. BlackRock’s iShares lineup includes a diverse array of sector and market-specific ETFs designed to meet various investment objectives.
What sets it apart from direct competitors?
- Global Exposure: IXJ offers investors exposure to healthcare companies from around the world, providing diversification across different markets and regions.
- Diverse Sub-Sector Coverage: The ETF includes a mix of pharmaceuticals, biotechnology, and medical devices, providing balanced exposure within the healthcare sector.
- Established Holdings: IXJ includes many of the world’s leading healthcare companies, offering stability and growth potential.
IXJ was launched in November 2001 and has consistently attracted investors seeking global exposure to the healthcare sector. It is suitable for investors seeking global exposure and diversification across different markets and regions.
5. iShares U.S. Healthcare
The iShares U.S. Healthcare ETF (IYH) aims to track the investment results of an index composed of U.S. equities in the healthcare sector. The fund provides exposure to companies in pharmaceuticals, biotechnology, medical devices, and healthcare providers.
Key holdings of this fund include the following companies,
- Eli Lilly & Co.
- United Health Group Inc.
- Johnson & Johnson
- Merck & Co. Inc.
- AbbVie Inc.
| Net Assets of Fund | Expense Ratio | 1-yr Return | 3-yr Return | 5-yr Return |
| $3.36 billion | 0.40% | 10.74% | 5.10% | 10.58% |
IYH is managed by BlackRock, the world’s largest asset manager, known for its broad range of iShares ETFs. BlackRock’s iShares lineup includes a diverse array of sector and market-specific ETFs designed to meet various investment objectives.
What sets it apart from direct competitors?
- Focused U.S. Exposure: IYH focuses on U.S.-based healthcare companies, offering targeted exposure to one of the world’s leading healthcare markets.
- Diverse Sub-Sector Coverage: The ETF includes a mix of pharmaceuticals, biotechnology, and medical devices, providing balanced exposure within the healthcare sector.
- Strong Track Record: IYH has a history of solid performance, supported by its diversified holdings and exposure to leading healthcare companies.
IYH was launched in June 2000 and has consistently attracted investors seeking targeted exposure to the U.S. healthcare sector. It is great for investors wanting focused exposure to U.S. healthcare companies with a mix of pharmaceuticals, biotechnology, and medical devices.
Final Thoughts
Whether you are looking for exposure to biotechnology-focused stocks or the healthcare sector, these ETFs have you covered. Once you have determined which interests you, make sure to check out our list of the top stock brokers in your region to gain access easily.