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Investing in healthcare stocks is always a challenge. It’s an incredibly diverse industry, and many investors lack deep knowledge of the sector.
Top 10 Healthcare Etfs
There are many sub-sectors within the healthcare industry. You can invest in medical technology, medical office software, healthcare technology, pharmaceuticals, or biologics.
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Biotechnology, or biotechnology as it is commonly known, is a fascinating field that is still in its infancy. Biotechnology companies use science and molecular biology to create treatments and cures for human diseases.
When it comes to healthcare and biotechnology stocks, there is something changing. Not every company will succeed in producing a cure. Some will fail at the clinical trial stage, while a select few will make it to the highly regulated consumer sales stage.
This is one reason why ETFs or Exchange Traded Funds are a great way to invest in the healthcare industry. Instead of putting all your eggs in a few baskets, you can diversify your investments across industries and sub-sectors as well.
In this article, I’ll review my picks for the 5 best Canadian healthcare ETFs for April 2023.
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Healthcare ETFs are a basket of stocks that can cover a specific sub-sector or a broad industry.
This currency holds many different companies. This makes the ETF a stable investment rather than trying to figure out which biotech or healthcare stocks will succeed.
XHC is a Canadian diversified ETF that provides exposure to global healthcare providers and is pegged to the Canadian dollar to cover any currency fluctuations.
This ETF holds the iShares Global Healthcare ETF (NYSEARCA:IXJ), a US-based ETF that holds 114 of the world’s largest healthcare companies. IXJ’s main assets are UnitedHealth Group, Johnson & Johnson, and Pfizer.
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A total of 73% of the assets in the fund are US companies. Switzerland and Japan ranked second and third with a total allocation of 7.99% and 4.70%, respectively.
ZUH is a Canadian-based ETF that provides direct exposure to 73 of the largest listed healthcare stocks in the United States. It is an equal weighted ETF which means all 73 assets are allocated equally to the fund.
This ETF is also pegged to the Canadian dollar to account for any currency fluctuations in the US dollar. It has a moderate risk rating and is suitable for all registered and non-registered Canadian investment accounts.
It owns some of the largest healthcare companies that trade on the US exchange, including UnitedHealth Group, Merck, Amgen, Thermo Fisher Scientific, and Johnson & Johnson.
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TDOC is not to be confused with the medical ticker symbol Teladoc (NYSE:TDOC). It is a new Canada-listed ETF that holds 156 of the world’s top healthcare stocks in a fund that is updated daily.
This ETF has a 65.90% weighting of mutual funds listed in the United States, which includes some of the largest healthcare providers in the world. These companies include Amgen, Thermo Fisher Scientific, and CVS Health.
Compared to other healthcare ETFs on this list, TDOC offers a higher dividend yield that is distributed to shareholders quarterly.
IBB is a Blackrock iShares biotech ETF traded on the NASDAQ in the US dollar. It has 369 of the largest biotech companies listed in the United States and can be considered a sector perspective.
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In the biotechnology sector, some companies work in pharmaceuticals, genomics, and other types of drug development. While most of these biotech stocks are small-cap companies, IBB holds stocks like Gilead Sciences, Amgen, Regeneron, and Moderna among its biggest holdings.
The biotechnology industry is volatile as many of these companies are not yet profitable and may even be in early earnings. The future of their success often lies in the treatments that the company spends years developing.
VHT is a Vanguard Healthcare ETF that trades on the NYSEARCA US dollar exchange. This ETF holds 407 of the largest US-listed healthcare stocks.
As far as healthcare ETFs go, VHT is considered one of the funds that cover the largest number of sectors in the healthcare industry. VHT’s three largest sectors are pharmaceuticals with a weight of 27.5%, healthcare equipment with a weight of 17.3%, and biotechnology with a weight of 17.1%.
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It houses some of the largest companies in the United States. Major shareholders include UnitedHealth Group, Johnson & Johnson, Pfizer, Eli Lilly, and AbbVie.
To invest in Canadian healthcare ETFs, you will need to open an account with a broker. When it comes to buying ETFs, I like using discount brokerages because their low trading fees don’t cut into long-term gains.
The healthcare industry is an interesting one to invest in. While we know that health care is an important part of our society, many companies work in the sector.
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Obviously, successful companies become fantastic investments over time, but there are many biotech stocks that never make it to that level of success.
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If you’re looking to invest in the healthcare and biotechnology industries, I like to adopt an ETF strategy that provides exposure to these companies while also limiting your upside.
Most of the ETFs I’ve talked about today are broad spectrum ETFs. You’ll also find that most healthcare and biotech stocks trade in the United States. This is why many of the health care ETFs on the TSX are pegged to the Canadian dollar.
Remember, this article is meant to be an introduction to the Canadian healthcare industry. It should never be considered investment advice, so always do your due diligence and research before investing in healthcare ETFs.
The downside of investing in healthcare ETFs can be seen in the 1-year performance of the ETFs I reviewed.
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As mentioned, healthcare and biotechnology, in particular, can be volatile sectors. This is despite the importance in our world of finding treatments, medicines, and vaccines that help prevent disease and illness.
Most healthcare ETFs are broad-based investments. This means that most of them will have the same property. It can be difficult to find variety unless you take a deep look at US-listed healthcare ETFs.
Are you looking for a little extra growth on your investment? You may be interested in holding personal healthcare and biotechnology stocks in your portfolio in addition to ETFs. Here is my list of the top 10 healthcare and biotech stocks for April 2023:
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Editorial Disclaimer: The investment information provided here is for informational purposes only and is not intended as personal advice or a recommendation to invest in any particular security or investment product. Investors should always conduct independent research before making investment decisions or implementing investment strategies. Savvy New Canadian does not provide consulting or brokerage services. Note that past investment performance does not guarantee future returns.
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Enoch Omololu is a private finance expert and veterinarian. He holds a Master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certifications in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and Doctor of Veterinary Medicine from the University of Ibadan. Enoch is passionate about helping others achieve financial success and has been writing about money for over ten years. He has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, CBC News, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, and many other personal finance publications. You can learn more about him on the About Page.
His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.
The content of this site is for informational and educational purposes only and is not intended as a substitute for professional financial advice. Always consult a licensed financial professional before making any decisions based on the information you read on this blog.
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Articles may contain affiliate links. This means that if you decide to make a purchase or sign up through these links, we may earn a free commission from you. Please read our disclaimer/disclosure for more information. The iShares US Healthcare Providers ETF (NYSEARCA:IHF) is a 70-stock portfolio with high exposure to managed healthcare, healthcare services, and healthcare facilities. While other analysts have previously expressed reservations about its valuation, this article shows that it is trading at a 2-3 point discount to forward earnings relative to the Healthcare Sector Select ETF ( XLV ) and the SPDR S&P 500 ETF ( SPY ). IHF is also the best performing US Health Care ETF over the past three and five years and its core holdings are very profitable.
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