Healthcare ETF, Health Care ETF

 

 

A healthcare ETF is an exchange traded fund that invests in a diversified basket of healthcare providers, pharmaceutical stocks and medical equipment manufacturers. healthcare ETFs usually outperform the market during a downtrend.[br]

 

Healthcare ETF: Characteristics

 

The proportion of stocks of healthcare providers and pharmaceutical and medical equipment manufacturers in a healthcare ETF generally depends on the fund management firm. However, some of the key characteristics of healthcare ETFs are:

• They have low exposure to cyclical and economic trends. This is because people need healthcare services, medicines and medical equipment even when there is an  economic slump. Thus, these ETFs are good defensive plays.

• Pharmaceutical companies generate higher international revenues when the economy recedes, as the value of the domestic currency weakens.[br]

 

Healthcare ETFs

 

Some of the popular healthcare ETFs are:

• Vanguard Healthcare ETF: Listed under the ticker symbol VHT, this ETF seeks to mirror the performance of the MSCI US Investable Market Health Care Index. The Vanguard Healthcare ETF contains 297 scripts, all of which have a median market size of approximately $45 billion. This ETF is considered as the most diversified of the healthcare ETFs.

• iShares Dow Jones US Healthcare Sector Index Fund: This ETF is based on the Dow Jones Index and consists of 139 healthcare stocks. As the iShares Dow Jones US Healthcare Sector Index Fund seeks to replicate the Dow Jones Index, stocks included in this ETF are selected passively and weighted to their market capitalization.

• Health Care Select Sector SPDR: With about $2 billion in assets, it is the largest healthcare ETF. This ETF consists of the stocks of the providers of healthcare equipment and supplies, services, biotechnology and pharmaceuticals in the S&P 500 index. It is listed under the ticker symbol XLV.

• PowerShares Dynamic Healthcare Sector Portfolio: The aim of this ETF is to outperform the key healthcare equity benchmarks. Thus, the stocks are selected by using a quantitative formula that considers their fundamental growth and valuation.

• First Trust Health Care AlphaDEX Fund: This ETF is listed on the US AMEX exchange under the ticker symbol FXH. This fund seeks investment results that are similar to the price and yield performance of the StrataQuant Health Care Index.

• Rydex S&P Equal Weight Health Care ETF:Listed under the ticker symbol RYH, this ETF follows the S&P 500 healthcare stocks. However, the ETF weights each stock equally, as a result of which the bias is towards mid- and small-company stocks.