Best Healthcare ETFs to Buy Now

stethoscope on white background with red cable shaped like a heart monitor

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last updated 24 August 2023

The best healthcare ETFs give investors exposure to a defensive corner of the market – one that is likely to benefit from consistent demand and rising prices over the long term.

The Baby Boomer generation has reshaped the U.S. economy in many ways. The most meaningful change is arguably still to come as this large cohort of Americans enters their golden years. By the year 2030, older Americans aged 65 and up will account for more than 20% of the entire population – up from 15% today. And by 2060, nearly one in four Americans will be above the age of 65, according to the Census Bureau.

While there are few things that are certain on Wall Street, it's all but guaranteed that these older adults are going to need a lot of care in the years to come. That means a long-term demographic tailwind that will provide growth and stability for the healthcare sector – and positive returns for the best healthcare ETFs.

It can be hard to pick individual winners and losers among healthcare stocks. Instead of putting all their eggs in one basket, healthcare ETFs allow investors to diversify across a group of stocks or industries. And thankfully, there are a number of diversified and established funds that provide easy access to this healthcare megatrend.

That said, here are six of the best healthcare ETFs to buy now. When compiling our list of the best ETFs to buy, we included a wide selection of healthcare-related exchange-traded funds that meet several different investment objectives.

Take a look.

Disclaimer

Data is as of Aug. 23. Dividend yields represent the trailing 12-month yield, which is a standard measure for equity funds.

Topics

The Vanguard Group S&P 500

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Best healthcare ETFs to buy

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Exchange-traded fund/ticker	Assets under management	Dividend yield	Expenses
Health Care Select Sector SPDR Fund (XLV)	$40.5 billion	1.6%	0.10%
Vanguard Health Care ETF (VHT)	$17.1 billion	1.4%	0.10%
SPDR S&P Biotech ETF (XBI)	$6.1 billion	0.0%	0.35%
iShares Global Healthcare ETF	$4.0 billion	1.3%	0.42%
ARK Genomic Revolution ETF	$2.0 billion	0.0%	0.75%
First Trust Health Care AlphaDEX Fund	$1.4 billion	0.3%	0.61%

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Health Care Select Sector SPDR Fund

Assets under management: $40.5 billion
Dividend yield: 1.6%
Expenses: 0.10%, or $10 annually for every $10,000 invested

When it comes to the best healthcare ETFs, the Health Care Select Sector SPDR Fund (XLV, $133.60) is the leader when it comes to assets under management. It's elegantly simple, taking every healthcare component in the S&P 500 Index of large U.S. stocks and excluding all the other stocks from the remaining sectors.

This leaves the fund with 70 of the largest healthcare stocks on Wall Street, including insurance giant UnitedHealth Group (UNH), industry icon Johnson & Johnson (JNJ) and Big Pharma mainstay Eli Lilly (LLY).

It's worth noting that these stocks are then also weighted by size, so these top three positions alone represent more than 25% of the entire portfolio. But if you want to focus on the leaders, both because of their scale as well as their stability, that may not be a drawback. The fund has the top five-star rating from Morningstar, and is the go-to healthcare ETF for those seeking out the best long-term investment stocks.

Learn more about XLV at the State Street Global Advisors provider site.

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Vanguard Healthcare ETF

Assets under management: $17.1 billion
Dividend yield: 1.4%
Expenses: 0.10%

If you want to look beyond the usual suspects when it comes to the best healthcare ETFs, the Vanguard Health Care ETF (VHT, $244.40) provides a deeper bench of more than 400 total components. This means plenty of the healthcare names you know and love along with smaller companies that may not be as familiar. These currently include over-the-counter drug manufacturer Prestige Consumer Healthcare (PBH) and surgical facilities operator Surgery Partners (SGRY).

Though there are a lot more smaller names in VHT, it's worth noting that Vanguard ETF is weighted toward the largest stocks. In other words, the list of top holdings is quite similar to what is found in XLV.

However, if you think there's something to be said for adding a bunch of smaller and more aggressive healthcare companies into the mix along with the traditional mainstays, then the Vanguard Health Care ETF could be an attractive option for your personal portfolio.

Learn more about VHT at the Vanguard provider site.

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SPDR S&P Biotech ETF

Assets under management: $6.1 billion
Dividend yield: 0.00%
Expenses: 0.35%

Speaking of smaller stocks, what if you want to leapfrog the most prominent healthcare companies out there and instead focus on development-stage biotechnology firms with dynamic potential? If this approach appeals to you, then consider the SPDR S&P Biotech ETF (XBI, $78.86) fund that excludes traditional healthcare and Big Pharma names and instead focuses on the world of research-driven biotech stocks.

The fund's lineup includes small-cap stocks such as neurological disease specialist Catalyst Pharmaceuticals (CPRX) and clinical-stage cancer company Revolution Medicines (RVMD). Oftentimes these companies are not yet profitable as they plow their cash into developing new and innovative therapies. But if things go well, their share price can often skyrocket on news of favorable drug trials or approval from the Food and Drug Administration (FDA).

There's admittedly more risk in this corner of healthcare. However, if you're more interested in start-ups developing next generation cures than the old guard in this sector, consider XBI as one of the best healthcare ETFs to invest in. An added bonus for many investors is that it has almost no overlap with core holdings in the S&P 500, so you can layer it into your portfolio without redundancy.

Learn more about XBI at the State Street Global Advisors provider site.

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iShares Global Healthcare ETF

Assets under management: $4.0 billion
Dividend yield: 1.3%
Expenses: 0.42%

Speaking of core holdings, it's important to acknowledge that many of the leaders in healthcare are multinational companies with global reach. That's true for domestic names that do a brisk business abroad, as well as Japanese and European companies that are common names in U.S. medical facilities.

To acknowledge this international nature of healthcare, many investors find the iShares Global Healthcare ETF (IXJ, $85.49) a preferable alternative to the earlier funds that are only focused on American companies. IXJ is indeed biased toward the U.S., with more than 70% of the fund focused on domestic names. However, it also has a healthy dose of international stocks from developed markets like Switzerland, Japan and the United Kingdom.

This allows inclusion of stocks such as Danish diabetes care leader Novo Nordisk (NVO), Swiss pharmaceutical giant Novartis (NVS) and London-based drugmaker AstraZeneca (AZN) to name a few.

The list of about 120 total holdings is a global "who's who" of the industry. While this will add geographic diversification, it doesn't introduce additional risk given the large and established nature of these stocks.

Learn more about IXJ at the iShares provider site.

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ARK Genomic Revolution ETF

Assets under management: $2.0 billion
Dividend yield: 0.00%
Expenses: 0.75%

The ARK Genomic Revolution ETF (ARKG, $31.61) is smaller than many of the other best healthcare ETFs featured here – both in terms of its assets and its components. As the name implies, this is a laser-focused healthcare fund that is only concerned with companies doing cutting edge research on gene therapies and other related healthcare technology.

The fund currently includes just over 40 names, but that shouldn't be much of a surprise given its specialization. Components at present include Cologuard creator Exact Sciences (EXAS), chemical simulation software company Schrödinger (SDGR) and genetic sequencing specialist Pacific Biosciences of California (PACB). You may not have heard of any of these stocks, but they are among the most dynamic healthcare companies out there right now.

Of course, many of the healthcare stocks included in ARKG are also among the most volatile. ARKG is actually down 13% over the last 12 months, while the broader S&P 500 Index is up 7%. Buyers of this healthcare ETF should be aware of this additional risk, but if you're not afraid of performance like this during tough times in pursuit of significant gains when things go well, this is an aggressive fund worth considering.

Learn more about ARKG at the Ark Invest provider site.

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First Trust Health Care AlphaDEX Fund

Assets under management: $1.4 billion
Dividend yield: 0.3%
Expenses: 0.61%

The approach of the First Trust Health Care AlphaDEX Fund (FXH, $102.95) is unique in that it takes an "enhanced" approach to exchange-traded funds. In other words, FXH starts with the healthcare stocks in the Russell 1000 Index and then hand-picks the stocks it ranks highest based on measures such as sales growth, share price momentum and book value. It then weights those picks based on how well they rank, theoretically biasing the fund toward the very best healthcare stocks out there right now, and rebalances quarterly to ensure it's keeping up with Wall Street.

Right now, that adds up to about 85 total names. Leaders include generic drugmaker Viatris (VTRS), dialysis provider DaVita (DVA) and animal health company Elanco Animal Health (ELAN).

FXH is the smallest of the healthcare ETFs on this list, though it is still decent in size with well over $1 billion in total assets under management and daily trading volume that regularly approaches 100,000 shares. That means investors can buy in with confidence – unlike some of the smaller and less established funds out there.

Learn more about FXH at the First Trust provider site.

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Jeff Reeves writes about equity markets and exchange-traded funds for Kiplinger. A veteran journalist with extensive capital markets experience, Jeff has written about Wall Street and investing since 2008. His work has appeared in numerous respected finance outlets, including CNBC, the Fox Business Network, the Wall Street Journal digital network, USA Today and CNN Money.