Best Health Care ETFs: Biotech, Pharma and Medical Funds

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In case you’re trying to spend money on the well being care trade, shopping for a well being care exchange-traded fund (ETF) is a straightforward approach to get began with out the trouble of analyzing particular person corporations.

With a well being care ETF, you should buy a broad cross-section of the trade and even chop it into finer segments. Both approach, yow will discover the group of shares you need to personal. An ETF additionally affords diversification, decreasing your danger in comparison with shopping for particular person shares.

Well being care presents important avenues for progress, too. As folks stay longer than ever earlier than, drugs has a number of ailments to struggle, whether or not it’s most cancers, coronary heart illness, Alzheimer’s, stroke or others. And U.S. well being care spending has been above-trend for many years. In 2023, the quantity spent on well being care hit $4.9 trillion, greater than triple the well being care expenditures of 2000, in accordance with Peterson-KFF’s Well being System Tracker.

So a well being care ETF might supply a horny approach to spend money on a resilient sector of the financial system. In fact, the very best investments for freshmen additionally supply tons of choices for all types of traders.

Listed here are a few of the greatest well being care ETFs based mostly on their sub-sectors. (Information as of April 28, 2025.)

Kinds of well being care ETFs

The well being care sector is giant, and it may be damaged down into sub-sectors, relying on the precise type of companies inside it. So you will have a number of methods to spend money on well being care, and a well being care ETF may give you publicity to those sectors:

So you will have fairly a couple of choices to choose from, relying on precisely what you need. However if you would like a cross-section of every part that’s well being care-related, you’ll need to have a look at an ETF labeled as broad well being care.

Finest well being care ETFs

1. Finest broad well being care ETF

Well being Care Choose Sector SPDR Fund (XLV)

This ETF tracks the Well being Care Choose Sector index, and contains well being care corporations within the Customary & Poor’s 500 index. The index contains corporations in prescribed drugs, tools and provides, health-care suppliers and biotechnology, amongst others.

• 5-year returns (annualized): 8.3 %
• Expense ratio: 0.08 %
• Dividend yield: 1.60 %

2. Finest biotechnology ETF

iShares Nasdaq Biotechnology ETF (IBB)

This fund tracks an index of biotechnology and pharmaceutical shares listed on the Nasdaq inventory trade, with prime holdings together with Amgen, Gilead Sciences and Vertex Prescription drugs.

• 5-year returns (annualized): -0.2 %
• Expense ratio: 0.45 %
• Dividend yield: 0.30 %

3. Finest medical units ETF

iShares U.S. Medical Gadgets ETF (IHI)

This ETF tracks an index of U.S.-listed shares of medical gadget corporations, together with Abbott Laboratories, Intuitive Surgical and Boston Scientific.

• 5-year returns (annualized): 7.1 %
• Expense ratio: 0.40 %
• Dividend yield: 0.45 %

4. Finest health-care suppliers ETF

iShares U.S. Healthcare Suppliers ETF (IHF)

This fund tracks an index of U.S.-listed suppliers of well being care, together with UnitedHealth, Cigna and Elevance Well being.

• 5-year returns (annualized): 6.4 %
• Expense ratio: 0.40 %
• Dividend yield: 0.78 %

5. Finest prescribed drugs ETF

iShares U.S. Prescription drugs ETF (IHE)

This ETF tracks an index of U.S.-listed pharmaceutical corporations, and it contains the shares of Eli Lilly, Johnson & Johnson and Royalty Pharma.

• 5-year returns (annualized): 7.5 %
• Expense ratio: 0.39 %
• Dividend yield: 1.64 %

What to search for in an ETF

When investing in ETFs, it’s helpful to take a look at a couple of facets of every ETF so that you just truly purchase what you meant to purchase. Listed here are three key issues to search for:

• The sub-sector — Every sub-sector could reply in a different way to situations within the trade. For instance, drug corporations reply in a different way than health-care suppliers to sure developments within the trade, since each depend on totally different funding sources. So it’s essential know what sorts of corporations you need to personal.
• The funding monitor document — You’ll additionally need to know the monitor document of the ETF. Has it outperformed the trade, or has it underperformed throughout a interval of power? The monitor document may give you some thought of what to anticipate from the ETF.
• The expense ratio — Additionally, take note of the expense ratio, which tells you ways a lot it prices to personal the fund yearly as a % of your whole funding in it.

Lastly, it’s price noting that bigger ETFs are inclined to cost decrease expense ratios as a result of they will unfold the prices of working the fund throughout extra property. So the most cost effective funds could typically be the most important funds, and a low expense ratio is a key measure of what makes a prime ETF.

The very best brokers for ETFs can assist you discover enticing funds with sturdy long-term returns.

Backside line

In case you’re on the lookout for publicity to well being care, you will have a number of choices relying on the sub-sector you need to tie your cash to. In case you don’t know which to purchase, you may spend money on an ETF targeted on the broad trade and acquire whole publicity. When you don’t essentially must know rather a lot to succeed with an ETF, some traders follow broadly diversified index funds, resembling these based mostly on the S&P 500 index, and depart buying and selling and fund-picking to the professionals.

— Bankrate’s Rachel Christian contributed to an replace of this text.

Editorial Disclaimer: All traders are suggested to conduct their very own impartial analysis into funding methods earlier than investing determination. As well as, traders are suggested that previous funding product efficiency is not any assure of future value appreciation.