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5 Best Healthcare ETFs to Buy in Q1 2025
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Healthcare is a relatively non-cyclical industry since the majority of healthcare services and products are essential. As such, healthcare ETFs are a great value-add to a defensive portfolio. On this page our experts pick out the best healthcare ETFs to invest in right now.
What are the top healthcare ETFs to buy?
Copy link to sectionOur analysts have selected five of the top ETFs in healthcare for this year as listed in the table below. To discover more about each in turn, continue scrolling through the page.
| # | ETF symbol | ETF name | Learn more |
|---|---|---|---|
| 1 | XLV | Health Care Select Sector SPDR Fund | Learn more > |
| 2 | VHT | Vanguard Healthcare ETF | Learn more > |
| 3 | IYH | iShares US Healthcare ETF | Learn more > |
| 4 | RSPH | Invesco S&P 500 Equal Weight Health Care ETF | Learn more > |
| 5 | IHI | iShares U.S. Medical Devices ETF | Learn more > |
1. Health Care Select Sector SPDR Fund (NYSEARCA: XLV)
Copy link to section- Current price: $147.09
- AUM: $39.49 billion
- Annual expense ratio: 0.09%
- YTD performance: 7.85%
- Annual dividend yield: 1.50%
The Health Care Select Sector SPDR Fund is a premier ETF managed by State Street Global Advisors, focusing on the U.S. healthcare sector. With a long history dating back to its inception in December 1998, XLV has established itself as a cornerstone for investors seeking comprehensive exposure to healthcare.
The fund aims to replicate the performance of the Health Care Select Sector Index, encompassing a broad range of companies from pharmaceuticals to biotechnology. XLV boasts an impressive estimated 3-5 year EPS growth rate of 17.64%, indicating strong future potential in earnings.
The ETF’s top holdings feature industry giants such as Eli Lilly, UnitedHealth Group, and Johnson & Johnson, reflecting a well-balanced mix of growth and value stocks. This robust portfolio structure, combined with a quarterly distribution and a solid annual dividend yield of 1.50%, makes XLV an attractive option for both income-focused investors and those seeking long-term capital appreciation in the healthcare space.
2. Vanguard Health Care Index Fund ETF (NYSEARCA: VHT)
Copy link to section- Current price: $269.37
- AUM: $20.39 billion
- Annual expense ratio: 0.10%
- YTD performance: 7.45%
- Annual dividend yield: 1.30%
Vanguard Health Care Index Fund ETF offers investors exposure to a broad spectrum of U.S. healthcare companies, making it a cornerstone in defensive investing strategies. VHT tracks the MSCI US Investable Market Index (IMI)/Health Care 25/50, encompassing large, mid, and small-cap stocks within the healthcare sector.
The fund’s composition of 425 stocks mirrors the sector’s diverse market capitalization, showcasing a balanced investment strategy across growth and value segments. With a historical annual return averaging 10% since its inception in 2004, VHT positions itself as a reliable choice for long-term investors seeking stability and growth in the healthcare industry.
Given the defensive nature of healthcare during economic downturns, VHT stands poised to capitalize on its recession-resistant attributes.
3. iShares US Healthcare ETF (NYSEARCA: IYH)
Copy link to section- Current price: $61.75
- AUM: $3.34 billion
- Annual expense ratio: 0.40%
- YTD performance: 7.86%
- Annual dividend yield: 1.15%
The iShares US Healthcare ETF, has demonstrated robust performance across various time horizons, making it a standout choice in the healthcare sector. IYH has consistently outperformed several other healthcare indices, boasting a remarkable +144.34% return over the past ten years.
Managed by BlackRock Fund Advisors, IYH tracks the Russell 1000 Health Care RIC 22.5/45 Capped Index. Investors benefit from IYH’s comprehensive coverage of the healthcare space, which spans pharmaceuticals, biotechnology, and medical devices.
This diversity, coupled with a competitive annual dividend yield of 1.15%, underscores IYH’s appeal as a reliable investment vehicle in a sector known for its defensive qualities and continuous innovation.
4. Invesco S&P 500 Equal Weight Health Care ETF (NYSEARCA: RSPH)
Copy link to section- Current price: $30.42
- AUM: $955.01 million
- Annual expense ratio: 0.40%
- YTD performance: 2.18%
- Annual dividend yield: 0.64%
The Invesco S&P 500 Equal Weight Health Care ETF (RSPH) stands out within the healthcare sector for its unique approach to weighting. Unlike traditional market-cap-weighted ETFs that favor larger companies, RSPH offers equal exposure across its holdings.
This strategy ensures that each constituent stock within the S&P 500 Equal Weight Health Care Index carries an equal influence on the fund’s performance, regardless of their market size. As of the latest data, RSPH includes 67 diverse healthcare stocks, featuring prominent names like Moderna Inc., Eli Lilly and Co., and Amgen Inc. among its top holdings.
Investors seeking a balanced exposure to healthcare can benefit from RSPH’s methodology, which mitigates the risk of over-concentration in a few large-cap stocks. This ETF’s approach not only diversifies risk but also provides a broader spectrum of opportunities within the healthcare sector, encompassing pharmaceuticals, biotechnology, medical devices, and more.
5. iShares US Medical Devices ETF (NYSEARCA: IHI)
Copy link to section- Current price: $55.57
- AUM: $5.11 billion
- Annual expense ratio: 0.40%
- YTD performance: 2.96%
- Annual dividend yield: 0.53%
The iShares US Medical Devices ETF (IHI) stands out within the healthcare sector for its focused exposure to U.S. companies specializing in medical devices. Managed by BlackRock Fund Advisors, IHI tracks the Dow Jones U.S. Select Medical Equipment Index, aiming to replicate its performance through a combination of direct investments and derivative instruments.
IHI’s portfolio includes prominent holdings such as Abbott Laboratories, Intuitive Surgical Inc, and Stryker Corp, which collectively make up a significant portion of its assets. These companies are leaders in their respective segments, driving IHI’s performance and offering investors exposure to cutting-edge advancements in healthcare technology.
As healthcare spending trends evolve and technological innovations continue to shape medical practices, IHI remains well-positioned to capture growth opportunities in this specialized market segment.
Where to buy the best healthcare ETFs
Copy link to sectionTo invest in an ETF, you must register with an online broker. ETFs are like individual stocks, so you can buy or sell them whenever you want. The table below is our pick of the best brokers that offer healthcare ETFs.
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What is a healthcare ETF?
Copy link to sectionIt’s an exchange traded fund that holds shares in companies that operate in the healthcare industry. Companies in this sector facilitate the provision of healthcare to patients, develop medical equipment or drugs, offer medical insurance, or provide medical services.
Healthcare is a resilient and relatively non-cyclical sector due to the essential nature of the products and services on offer, so these ETFs are often able to provide their investors with relatively stable and long-term returns.
Are healthcare ETFs a good investment?
Copy link to sectionThey often are as they provide stable and long-term returns on investment. The healthcare industry is essential and provides services and products that have relatively inelastic demand. A defensive portfolio stands to gain a strong vantage point with the addition of a decent healthcare ETF.
Price volatility is not a concern for most large, diversified ETFs in the industry. If an ETF has low specific-stock risk and operating expenses, they are a relatively solid bet for a new investor. The evolving technology and innovation in the sector is also attractive for the potential of future returns in investment.
It must be noted that the trade off for such low-risk investments is that generating returns takes time. Healthcare ETFs underperformed the market in the past year and in most cases, investors in the sector must have patience and the view of long-term investment.
Methodology: How we choose the best healthcare ETFs
Copy link to sectionAt Invezz, we are dedicated to helping investors make informed decisions by providing authoritative, accessible, and engaging advice and recommendations. Our curated section of the best Exchange-Traded Funds (ETFs) is carefully selected by our team of experienced market analysts and reviewed by a sub-editor. This methodology outlines the rigorous process we follow to ensure our ETF recommendations are up-to-date, reliable, and insightful.
- Analyst research & recommendations: Our seasoned market analysts use their in-depth sector knowledge to identify ETFs with strong potential, ensuring they meet high standards of performance, liquidity, and market potential.
- ETF evaluation: We evaluate ETFs based on their underlying assets, historical performance, expense ratios, and tracking accuracy, alongside macroeconomic factors and sector trends.
- Fund performance reports: We assess ETFs through the latest performance reports, analyzing key metrics like returns, volatility, expense ratios, and assets under management (AUM).
- Sector analysis and external recommendations: Our detailed sector analysis, combined with recommendations from reputable sources like Barron’s and Zacks, provides an additional layer of validation for our selections.
- Quarterly review & refresh: We update our curated ETF list quarterly, re-evaluating each ETF based on the latest reports, industry developments, and market conditions to ensure our recommendations reflect the most current information available.
