Exchange-traded funds (ETFs) can provide investors with broad-based exposure to the entire healthcare sector.
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There are lots of components to healthcare. From pharmaceutical companies to insurers, medical device makers to companies that develop and distribute medical supplies to hospitals. These various components can perform differently from one another.
Just as a pharmaceutical company such as Eli Lilly (LLY) can see its stock soar, health insurers such as Humana (HUM) can see their share price crumble. In such an environment, it can be difficult for investors to know where to invest. Picking winners from losers can seem like an impossible task.
Own the Entire Market
A core tenet of investing is diversification. Many analysts and investing experts recommend that investors own the entire market rather than individual stocks. This is where ETFs come in, offering both diversification and a hedge against the risk of stock ownership.
In the healthcare space, there are several ETFs that essentially allow investors to own the entire market. These include the Vanguard Health Care ETF (VHT) that provides broad, low-cost exposure to the entire U.S. healthcare sector.
There’s also the iShares U.S. Healthcare ETF (IYH) that tracks a broad index of U.S. healthcare stocks, and the iShares Global Healthcare ETF (IXJ), which offers international healthcare exposure, including of major pharmaceutical companies. Below is a comparison of these three ETFs.
