Best healthcare ETFs to buy in 2022

With the ongoing pandemic, healthcare continues to emerge as an important industry for both commercial and personal investment. This page offers a selection of the best healthcare ETFs for this year.
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Updated: Sep 23, 2022

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?

Our 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 symbolETF nameWhere to Trade
1XLVHealth Care Select Sector SPDR Fund
2VHTVanguard Healthcare ETF
3XWDHXtrackers MSCI World Health Care
4PSCHInvesco S&P SmallCap Health Care ETF
5IHIiShares U.S. Medical Devices ETF
List chosen by our team of analysts, Updated 21 July 2022

1. Health Care Select Sector SPDR Fund (NYSEARCA: XLV)

XLV is a safe and cost-effective way for the new investor to invest in healthcare companies. The fund aligns with the price and yield performance of the Health Care Select Sector Index. Investors to the fund are exposed to a range of companies in the healthcare industry that are representative of the S&P 500 Index.

XLV comprises companies from a diverse range of industries, the current allocation has a majority focus on pharmaceuticals and healthcare services & equipment – nearly identical to that of the Index. As it is not possible to directly invest into an Index, XLV is designed to enable an investor to invest in a more strategic manner by taking tactical positions in a fund that aims to best replicate the Index. 

2. Vanguard Healthcare ETF (NYSEARCA: VHT)

VHT is a low-cost and tax-efficient healthcare ETF. Aimed at providing a wide-ranging exposure to the healthcare industry, VHT is a passively managed fund. Passively managed funds are preferred by both institutional and retail investors alike as they are better suited to a low-risk and long-term investment style.

VHT aims to replicate the MSCI US Investable Market Health Care 25/50 Index and currently holds 455 US healthcare stocks. This is done with the fund’s aim to reduce risk to the investor by diversifying its holdings in a large portfolio. Notable individual stock holdings include Johnson & Johnson, Unitedhealth Group, and Pfizer.

The fund’s performance has consistently grown since its launch in 2004; it is up 25% in the last year alone. Furthermore, the fund has a favourable expense ratio – this determines a fund’s operating expenses and is significant to investors because the higher the operating expenses, the lower the returns on investment. With their current annual operating expenses at 0.10%, VHT is one of the most affordable EFTs in the healthcare space.

3. Xtrackers MSCI World Health Care (MILAN: XWDH)

XWDH is a low-cost healthcare ETF domiciled in Ireland, amassing a large pool of assets under management. It currently comprises 154 global healthcare stocks – the widely varied range of stocks means that there is less risk from the failure of any individual stock.

The fund aims to track the MSCI Daily Total Return World Net Healthcare Index. Uniquely, XWDH enables an investor to gain physical exposure to the securities that comprise the Index as the fund owns them directly. Therefore, by investing in the fund and owning its shares, you earn the returns of the securities.

At 0.25% operating expenses, the fund is a reliable bet in the healthcare industry. As an older and established ETF, the fund’s consistent growth since its launch supports the safeguard of its low-risk offering. 

4. Invesco S&P SmallCap Health Care ETF (NASDAQGM: PSCH)

PSCH is a healthcare ETF that aims to track the S&P SmallCap 600 Capped Health Care Index. The fund currently invests 90% of its total assets into the securities of 76 small-cap US healthcare companies that constitute the index. As such, it is most suitable for speculative investors that can bear high risk adjusted with diversification. 

The fund is highly rated on the MSCI ESG Fund Rating, which means that it is great for socially conscious investors interested in ESG investing. Invesco has strong management of financially-relevant ESG issues and is therefore more resilient to disruptions.

PSCH’s current annual operating expenses are 0.29%, making it a low-cost bid in the healthcare ETF space. The fund is currently up 29% in the last year, a good recent performance that might be ideal for the new investor. 

5. iShares U.S. Medical Devices ETF (NYSEARCA: IHI)

IHI is a non-diversified healthcare ETF that aims to track the Dow Jones U.S. Select Medical Equipment Index. It is unique because it focuses on an often forgotten aspect of the healthcare space, the medical device makers. Its 70 holdings are companies that tend to be much smaller than their counterparts in big pharma, have less issues with patent processes, and have more sustainable revenue streams.

As IHI is a niche fund that specifically focuses on companies that manufacture and distribute medical devices, it is prone to specific-market risk. The good news is, however, that the medical devices market is low risk. 

Optimistically, the fund currently has 0.41% annual operating expenses, making it a low-cost option in the sector. The fund is also up 26% over the last year, which is reassuring for its investors.

Where to buy the best healthcare ETFs

To 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.

1
Min. Deposit
$ 10
Promotion
User Score
10
Up to $240 bonus!
Deposit with ACA, Wire, Pay with my bank
Invest for dividends and get payout on stocks on Ex-Dividend day
Start Trading
Payment Methods:
Bank Transfer, Wire Transfer
Full Regulations:
CySEC, FCA
Investoo Ltd is compensated if you access certain of the products or services offered by eToro USA LLC and/or eToro USA Securities Inc., as applicable. This compensation incentivizes Investoo Ltd to describe those products and services in favorable terms. Any testimonials contained in this communication may not be representative of the experience of other eToro customers and such testimonials are not guarantees of future performance or success.
2
Min. Deposit
$ 100
Promotion
User Score
10
Trade out-of-hours on over 70+ US stocks
Get exposure to a wide range of popular UK, US and international stocks
Enjoy flexible access to more than 17,000 global markets, with reliable execution
Start Trading
Payment Methods:
Bank Transfer, Credit Card, Debit Card, PayPal
Full Regulations:
ASIC, FCA, FINMA, is a licensed bank (IG Bank in Switzerland)
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
3
Min. Deposit
$ 0
Promotion
User Score
9.5
$0 commission and $0 Options contract fees
Upgraded research with advanced charts
Smart Menus for faster trades
Start Trading
Payment Methods:
Full Regulations:

What is a healthcare ETF?

It’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?

They 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. It is key to stay up to date with the latest news and developments in order to best place an investment, you can do so by following the links below or by reading: the best performing ETFs.

Latest healthcare news

Eli Lilly & Co (NYSE: LLY) is in focus on Thursday after the pharmaceutical giant said the U.S. FDA agreed to a speedy review of Tirzepatide for the treatment of obesity and weight-related comorbidities. Why does that matter? A late-stage clinical trial has already shown “Mounjaro” to be effective…
Gilead Sciences Inc (NASDAQ: GILD) ended in the green on Tuesday after a JPMorgan analyst turned bullish on the biopharmaceutical company. Gilead stock should be worth $80 a share Chriss Schott now rates this healthcare name at “overweight” and sees upside to $80 a share – about a 25%…
Myovant Sciences Ltd (NYSE: MYOV) opened nearly 35% up on Monday after the biopharmaceutical company said it rejected a buyout proposal from its largest shareholder. Myovant is open to considering a better offer Sumitovant Biopharma Ltd had sought to takeover the London-headquartered firm for $2.18 billion, as per the…
Eli Lilly & Co (NYSE: LLY) will continue to do well even as the U.S. Federal Reserve aggressively lift rates further, says Gina Sanchez – the Chief Executive of Chantico Global. Sanchez is bullish on its obesity drug Last year, the pharmaceutical giant reported promising results for its experimental…
Rite Aid Corporation (NYSE: RAD) tanked nearly 30% on Thursday after the drugstore chain reported bigger than expected loss for its fiscal second quarter and lowered guidance for the full year. Rite Aid Q2 earnings snapshot Lost $331.3 million versus the year-ago figure of $100.3 millionPer-share loss climbed significantly…
Biogen Inc. (NASDAQ:BIIB) gained more than 48% on Wednesday’s stock premarket. The stock was among the top trends on popular social trading platforms. There were definite reasons. On Tuesday, company news indicated that Biogen and Japanese Eisai had achieved success in Alzheimer’s…
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Srijani Chatterjee
Financial Writer
Srijani is the quintessential Third Culture Kid having grown up in India, Singapore, Malaysia, The Netherlands, Scotland, and England. She still loves to travel and speaks… read more.