Advertiser Disclosure
Advertiser Disclosure: The credit card and banking offers that appear on this site are from credit card companies and banks from which MoneyCrashers.com receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. MoneyCrashers.com does not include all banks, credit card companies or all available credit card offers, although best efforts are made to include a comprehensive list of offers regardless of compensation. Advertiser partners include American Express, Chase, U.S. Bank, and Barclaycard, among others.

9 Best Health Care ETFs of 2021


FEATURED PROMOTION


Dig Deeper

Additional Resources

High School Grads: Start College in Fall 2021 or Take a Gap Year?
9 Best Business Bank Account Promotions & Offers - October 2021
6 Best Tech Stocks to Buy in 2021
15 Tips for Shopping for Fresh Produce at Local Farmers Markets
Green Energy Tax Credits for Home Improvement & Energy Efficiency

Technological innovation is everywhere you look.

One of the biggest changes taking place thanks to advancements in technology is an evolution in health care. New technologies are making simple work of some of the most pressing medical conditions known to man. Even the COVID-19 pandemic has been proof that the health care sector is evolving, with vaccines being created and marketed within a year of the outbreak of the novel coronavirus.

Of course, the health care industry is massive. Well-researched investments in a variety of health care stocks and bonds have proven to be lucrative moves. But what if you don’t have the time or expertise to do the research it takes to make individual health care investments?

That’s where health care exchange-traded funds (ETFs) come in.

Pro tip: David and Tom Gardener are two of the best stock pickers. Their Motley Fool Stock Advisor recommendations have increased 563% compared to just 131.1% for the S&P 500. If you would have invested in Netflix when they first recommended the company, your investment would be up more than 21,000%. Learn more about Motley Fool Stock Advisor.

Best Health Care ETFs

Health care ETFs are funds that pool money from a large group of investors and then invest in health care stocks and other health care-focused investments. Some of these funds focus on the health care sector as a whole, using diversification to tap into all corners of the industry. Others focus on subsectors like hospital networks, insurance companies, or health care equipment companies.

As with any investment vehicle, not all ETFs are created equal. Some will come with higher costs than others, and returns on your investment will vary wildly from one fund to another.

With so many options available, it can be difficult to pin down which ETFs you should invest in. Here are some of the best options on the market today:

1. Vanguard Health Care Index Fund ETF (VHT)

  • Expense Ratio: 0.10%
  • One-Year Return: 29.92%
  • Five-Year Annualized Return: 15.33%
  • Dividend Yield: 1.14%
  • Morningstar Rating: 4 out of 5 stars
  • Largest Holdings: The top holdings in the VHT portfolio include Johnson & Johnson (JNJ), UnitedHealth Group (UHC), Pfizer (PFE), Abbott Laboratories (ABT), and AbbVie (ABBV).
  • Years Up Since Inception: 14 out of 16

Vanguard is one of the best-known wealth managers on Wall Street. So, you can rest assured that when you invest in a health care ETF, or any other Vanguard fund, your money is in good hands.

The Vanguard Health Care Index Fund ETF is focused on investing in companies that sell medical products, services, equipment, and technologies using a highly diversified portfolio.

As a Vanguard fund, the VHT comes with an incredibly low expense ratio and a strong history of providing compelling returns for investors.


2. Health Care Select Sector SPDR Fund (XLV)

  • Expense Ratio: 0.12%
  • One-Year Return: 27.83%
  • Five-Year Annualized Return: 13.88%
  • Dividend Yield: 1.37%
  • Morningstar Rating: 4 out of 5 stars
  • Largest Holdings: The largest holdings in the Health Care Select Sector SPDR Fund portfolio include Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Pfizer (PFE), Abbott Laboratories (ABT), and AbbVie (ABBV).
  • Years Up Since Inception: 17 out of 22

The Health Care Select Sector SPDR Fund is offered by State Street Global Advisors, one of the largest asset management companies on Wall Street. The firm behind this fund is one with pedigree.

As a passively-managed fund, the XLV was designed to track the returns of the Health Care Select Sector Index, which provides a representation of the health care companies listed on the S&P 500.

As a result, the XLV ETF provides diversified exposure to some of the largest U.S. health care companies. The fund provides compelling returns and relatively strong dividends compared to others in the health care industry. As is the case with most funds provided by State Street Global Advisors, this ETF comes with incredibly low fees, far below the industry average.

Pro tip: Have you considered hiring a financial advisor but don’t want to pay the high fees? Enter Vanguard Personal Advisor Services. When you sign up, you’ll work closely with an advisor to create a custom investment plan that can help you meet your financial goals.  Learn more about Vanguard Personal Advisor Services.


3. ARK Genomic Revolution ETF (ARKG)

  • Expense Ratio: 0.75%
  • One-Year Return: 78.83%
  • Five-Year Annualized Return: 42.6%
  • Dividend Yield: 0%
  • Morningstar Rating: 5 out of 5 stars
  • Largest Holdings:The largest holdings in the ARKG ETF include Teladoc Health (TDOC), Exact Sciences (EXAS), Pacific Biosciences of California (PACB), CareDx (CDNA), and Regeneron Pharmaceuticals (REGN).
  • Years Up Since Inception: 4 out of 6

The ARK Genomic Revolution ETF is offered by ARK Invest, yet another highly trusted fund manager on Wall Street. The ETF is designed to provide diversified exposure to companies that are working to extend the length and improve the quality of life for consumers with debilitating conditions through technological and scientific innovations in genomics.

Essentially, this fund invests in companies focused on the editing of genomes, or base units within DNA, to solve some of the most pressing problems in medical science.

With genomics being a relatively new concept that’s showing incredible promise in the field of medicine, companies in the space are experiencing compelling growth, making the ARKG ETF one of the best performers on this list.

However, it’s also worth mentioning that this is one of the higher-volatility ETFs on the list, which adds to the risk of investing.


4. Fidelity MSCI Health Care Index ETF (FHLC)

  • Expense Ratio: 0.08%
  • One-Year Return: 29.85%
  • Five-Year Annualized Return: 15.33%
  • Dividend Yield: 1.24%
  • Morningstar Rating: 4 out of 5 stars
  • Largest Holdings: The top holdings in the FHLC investment portfolio include Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Pfizer (PFE), Abbott Laboratories (ABT), and AbbVie (ABBV).
  • Years Up Since Inception: 6 out of 7

Fidelity is a massive company that has grown to become a household name thanks to its insurance division. It’s also one of the biggest and most well-trusted fund managers on Wall Street.

The company’s MSCI Health Care Index ETF has become a prime option for retail investors who want to gain diversified exposure to the U.S. health care sector.

The ETF was designed to track the MSCI USA IMI Health Care Index, which represents the universe of investable large-cap, mid-cap, and small-cap U.S. equities in the health care sector.

As can be expected from the vast majority of Fidelity funds, the FHLC is a top performer on the market with a relatively low cost.


5. iShares Nasdaq Biotechnology ETF (IBB)

  • Expense Ratio: 0.46%
  • One-Year Return: 19.95%
  • Five-Year Annualized Return: 14.04%
  • Dividend Yield: 0.19%
  • Morningstar Rating: 3 out of 5 stars
  • Largest Holdings: The top holdings in the iShares Nasdaq Biotechnology ETF include Amgen (AMGN), Gilead Sciences (GILD), Moderna (MRNA), Illumina (ILMN), and Regeneron Pharmaceuticals (REGN)
  • Years Up Since Inception: 15 out of 19

iShares has become yet another leading fund manager on Wall Street, and the firm’s Nasdaq Biotechnology ETF is yet another strong option to consider if you’re looking for diversified exposure to the U.S. health care sector.

The fund was specifically designed to provide exposure to the biotechnology and pharmaceuticals subsectors of the health care industry, and does so by investing in biotech and pharmaceutical companies listed on the Nasdaq.

As an iShares fund, investors will enjoy market-leading returns through a diversified portfolio of investments selected by some of the most trusted professionals on Wall Street. The IBB expense ratio is around the industry-average ETF expense ratio of 0.44%, according to The Wall Street Journal, but the fund’s expenses are justified by its outsize returns.


6. iShares U.S. Healthcare Providers ETF (IHF)

  • Expense Ratio: 0.42%
  • One-Year Return: 38.91%
  • Five-Year Annualized Return: 17.27%
  • Dividend Yield: 0.52%
  • Morningstar Rating: 3 out of 5 stars
  • Largest Holdings: The top holdings in the IHF include UnitedHealth Group (UNH), CVS Health (CVS), Anthem (ANTM), Humana (HUM), and Centene Corp. (CNC).
  • Years Up Since Inception: 13 out of 14

The iShares U.S. Healthcare Providers ETF is designed to provide exposure to a different area of the health care industry. Instead of investing in companies that create treatments and therapeutic options, the IHF fund invests in companies that provide health insurance, specialized care, and diagnostics services.

To do so, the ETF invests in an index designed to track large U.S. health care providers.

The fund costs slightly lower than the average expense for ETFs, while providing performance that’s hard to ignore. While IHF isn’t the best dividend payer, the iShares U.S. Healthcare Providers ETF does provide compelling returns, making it a strong pick for any health care investor’s portfolio.


7. iShares U.S. Medical Devices ETF (IHI)

  • Expense Ratio: 0.42%
  • One-Year Return: 36.76%
  • Five-Year Annualized Return: 22.07%
  • Dividend Yield: 0.33%
  • Morningstar Rating: 5 out of 5 stars
  • Largest Holdings: The largest holdings in the IHI investment portfolio include Abbott Laboratories (ABT), Thermo Fisher Scientific (TMO), Medtronic (MDT), Danaher (DHR), and Intuitive Surgical (ISRG).
  • Years Up Since Inception: 12 out of 14

The iShares U.S. Medical Devices ETF gives investors access to a diversified portfolio of stocks in the medical device subsector. Investments in the company center around products like glucose monitoring devices, robotics-assisted surgery technology, and devices that improve clinical outcomes for back surgery patients.

In order to provide this exposure, the iShares U.S. Medical Devices ETF tracks an index composed of domestic medical devices companies.

With a cost that’s right in line with the industry average, the fund’s performance over the past 10 years has been anything but, with annualized returns throughout the period of more than 18%, earning it a perfect five-star rating from Morningstar.


8. Invesco S&P 500 Equal Weight Health Care ETF (RYH)

  • Expense Ratio: 0.40%
  • One-Year Return: 32.46%
  • Five-Year Annualized Return: 14.82%
  • Dividend Yield: 0.42%
  • Morningstar Rating: 4 out of 5 stars
  • Largest Holdings: The largest holdings in the RYH investment portfolio are Resmed (RMD), Danaher (DNR), IDEXX Laboratories (IDXX), Thermo Fisher Scientific (TMO), and Bio-Rad Laboratories (BIO).
  • Years Up Since Inception: 11 out of 14

Founded in 1935, Invesco is a fund manager that’s been around the block more than a few times. It’s all but expected that the firm would make an appearance in just about any “top ETF” list.

Based on the S&P 500 Equal Weight Health Care Index, the ETF provides diversified exposure to all health care stocks listed on the S&P 500. That means when you purchase shares of RYH, you’ll be tapping into a wide range of health care stocks.

In fact, the S&P 500 represents more than 70% of the market cap of the entire U.S. stock market, which is why it’s often used as a benchmark. So, by tapping into every health care stock listed on the index, you’ll be tapping into some of the highest quality U.S. companies in the space.


9. SPDR S&P Biotech ETF (XBI)

  • Expense Ratio: 0.35%
  • One-Year Return: 21.22%
  • Five-Year Annualized Return: 20.34%
  • Dividend Yield: 0.23%
  • Morningstar Rating: 2 out of 5 stars
  • Largest Holdings: The largest holdings in the XBI portfolio are Intellia Therapeutics (NTLA), Editas Medicine (EDIT), Anavex Life Sciences (AVXL), Beam Therapeutics (BEAM), and MannKind (MNKD).
  • Years Up Since Inception: 11 out of 14

Another fund offered up by State Street Advisors, the SPDR S&P 500 Biotech ETF is an impressive option.

The XBI ETF was designed to track the S&P Biotechnology Select Industry Index, an index designed to track the biotech subsector of the health care industry. As a result, an investment in this fund means you’ll be investing in all biotechnology companies listed on the S&P 500.

Not to mention, while returns on XBIO have been impressive to say the least, the average cost on the fund is below the industry average. Although the SPDR S&P Biotech ETF isn’t the biggest income earner on this list, it is a strong play with a relatively consistent history of producing gains far beyond those seen across the wider market.


Final Word

Health care ETFs are a great option for investors who are interested in using their investments to create some good in the world. Not only are the top ETFs in this space known for producing incredible returns, it feels good knowing that your investment dollars are helping companies produce medications, devices, and services designed to improve quality of life and extend the length of the lives of your fellow man.

Although investing in health care ETFs is a promising way to go about building your wealth in the stock market, it’s important to remember not all ETFs are created equal. So, it’s best to do your research, looking into key stats surrounding historic performance and expenses before diving into any fund.

Nonetheless, the ETFs listed above are some of the strongest performers in the health care industry, and make a great first watchlist for the newcomer to health care ETF investing.

FEATURED PROMOTION

Stay financially healthy with our weekly newsletter

FEATURED PROMOTION