Best Health Care Funds to Buy

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7 Health Care Funds You Should Buy

Dec 31, 2023 By Triston Martin

Healthcare is a basic need, so regardless of the economic state, medical services will always be necessary. Investing in health care funds is a defensive decision because they are both safe and have less possibility of risk.

Why invest in health care funds?

Health care is an essential service and is only poised to grow with increased innovation and technology. Therefore, healthcare funds will always be in demand at all times.

Healthcare funds are defensive. This means that despite the stock market’s state, health care funds will provide stable and consistent dividends. Your health is a priority and supersedes any other priority at the time. Health is non-negotiable.

The health care sector is divided into several subsectors, such as pharmaceuticals, medical equipment, sales, and technology. Investing in one or multiple of these not only diversifies your portfolio but also shelters your investments against risk.

Now that we have a broad understanding of why health care funds are a gem to invest in, we shall dive into the actual funds that make it on our list:

Schwab Health Care Fund (SWHFX)

Closing at $25.20, SWHFX is a health care fund in the health and biotech category. The fund grows its value by investing 65% of its total assets in ordinary stocks in the healthcare industry. Schwab Health Care Fund has assets of about $840 million.

The fund has invested 6.7% of its portfolio in UnitedHealth Group, 5.7% in Johnson & Johnson and 5.1% in Pfizer. All three of these are well-performing leaders in the medical industry.

The standard deviation of SWHFX is 15.78%, while the category average is 19.26%. A lower standard deviation means that the fund is less volatile, which is a plus for investors.

Investing in this fund does not require an initial deposit nor a mimum for every subsequent investment. One is at liberty to invest any amount, and without any restrictions.

Fidelity Select Pharmaceuticals Port (FPHAX)

FPHAX prides itself as providing its investors with high returns and low risks. There is no minimum investment amount. FPHAX has been in business since 2001 and has amassed $778.43 million in portfolio net assets.

It has invested 14.46% of its portfolio in Lilly (Eli) & Co., 10.6% in AstraZeneca PLC, and 8.54% in Sanofi. FPHAX invests 80% of its portfolio in healthcare common stocks, especially in companies dealing with research and manufacture of drugs.

Closing at $22.21, FPHAX has an expense ratio of 0.77%. The company has $837.55 million in net assets and a yield of 1.06%.

Vanguard Health Care Fund (VGHCX)

VGHCX, led by manager Jean Marie Hynes since May 2008, has the following portfolio:

7.27% at UnitedHealth Group Inc.
6.27% at Pfizer Inc.
6.06% at Eli Lilly and Co.
5.86% at AstraZeneca PLC.
4.02% at Novartis AG.

These are the top five holdings, totaling 29.48%. VGHCX invests at least 80% of its assets in company stock dealing with production and distribution of products and services in the healthcare industry.

It closed at $204.09 with an expense ratio of 0.3%. The fund has a minimum investment requirement of $3,000. It only follows healthcare stock, but this narrow scope should not discourage investors. The fund has a history of over quarter a decade.

VGHCX’s fund advisor, Wellington Management, prefers to buy-and-hold. This strategy may not produce the highest returns as compared to its peers, but it ensures risk is minimized as much as possible.

UnitedHealth Group Incorporated (UNH)

UnitedHealth Group is a private healthcare insurance company based in Minnetonka, Minnesota. Its stock price, UNH, is $540.22. They provide employer-sponsored, self-directed and government-backed insurance programs. UnitedHealth has vast investments in Optum franchises, which means that UNH follows a variety of diversified stock.

UnitedHealth’s stock is considered overvalued when compared to its peers, but if we consider performance based on numbers, UNH is a key health care fund to watch.

Recently, UnitedHealth came into a partnership with Apple. UnitedHealth’s fully insured members in employer-sponsored plans will access the Apple Fitness service for free on their iPads and iPhones. UnitedHealth provides its clients with top-notch services, which ultimately grows its stock’s value.

Cigna Corp (CI)

Cigna is another healthcare company focusing on insurance. It was founded in 1982, and is headquartered at Bloomfield, Connecticut. It also deals with dental and medical services. Cigna Corporation encompasses Evernorth and Cigna Healthcare.

The company’s stock, CI, has a stock price of $311.20.

Johnson & Johnson (JNJ)

Johnson & Johnson (J&J) deals with pharmaceuticals and medical products. By revenue, J&J is ranked number 36 out of the 2021 Fortune 500 list. In fact, J&J has a higher prime credit rating than that of the US government. Its headquarters are in New Brunswick, New Jersey.

Its stock, JNJ, goes for $170.72, with dividends for the past year being $1.13. JNJ is considered a hold investment at the moment, with a strong dividend rating compared to some of its peers.

Johnson & Johnson earns almost half its earnings from countries other than the US. With new drugs being produced periodically, and others being in production, J&J’s income is only set to grow. During COVID-19, J&J’s vaccine was approved by most nations, despite the warning about blood clots. Still, this greatly improved JNJ’s performance in the stock market.

Fidelity Select Health Care Services Portfolio (FSHCX)

Managed by Justin Segalini since 1^st January 2016, FSHCX has an annual total return of 20.15% for the year 2021. Its expense ratio is 0.71%. The fund has almost 36 years of existence, thus being a leader in its sector.

The fund has a total net asset portfolio of $1.576 billion and a turnover rate of 17%. The minimum amount required to invest is $0. The expense ratio is 0.71%.