The top 20 health care ETFs of the decade

Philosophically and economically, health is wealth.

In the United States, healthcare is not just a necessity. It’s also a highly profitable industry. Statistics show that in 2022, healthcare spending accounted for 17.3% of the country’s gross domestic product. Centers for Medicare & Medicaid ServicesAmericans collectively spend $4.5 trillion on health care, averaging $13,493 per person.

That spending has made health care a major segment of the U.S. stock market, with health care stocks ranking 10th among all sectors for total return in 2023, according to Morningstar Direct.

“I think it’s common sense to invest in health care,” Chairman Kashif Ahmed said. american private property Located in Bedford, Massachusetts. “Can you live without healthcare, whether it’s an ETF, a mutual fund wrapper, or an individual stock? No.”

And in important ways, time is on our side here: Americans are aging, and as they get older, they need more health care. Between 2010 and 2020, the U.S. population over 65 grew 38.6%—the fastest rate since the 19th century. us census By 2034, the elderly will more than the number of children A first in American history.

this gray tsunami Large amounts of medicines, medical equipment and services will be needed, and with demand expected to rise, investing in healthcare seems like a safe bet to many asset managers.

“As technology becomes more prevalent in medicine, health care is becoming a growing sector of the American economy.” LPL Financial Located in Millersburg, Ohio. “Investors should own stocks in this important sector.”

How can investors ride this wave? Picking specific healthcare stocks can be difficult, but ETFs offer what nearly every financial advisor recommends: diversification.

“With one stroke of a pen, you can capture the entirety of that particular market,” Ahmed said. “I think that’s an easier way to bet than betting on one company. … Why would he bet on one store when he could buy the whole mall?”

On the other hand, one of the major advantages of this sector is also a disadvantage. According to , the United States spends more on health care than any other country. Organization for Economic Cooperation and DevelopmentThis means more profits for the industry, but also increased political pressure for reform, adding an element of unpredictability to an otherwise stable market.

“The federal government is a giant in the health care sector,” Hovis said. “Sudden policy changes by Medicare and Medicaid, as well as laws affecting what health insurers can and cannot do, will have far-reaching and often unexpected effects on companies that provide health care products and services.”

But such policy changes are rare. The last major national reform was the Affordable Care Act, passed in 2010. And any further reforms will require Congress to break out of its usual gridlock. Congress is tough on this issue.

read more: Financial Advisor’s Guide to Medicare

On the other hand, medical-related funds maintain high profitability. Over the past decade, the top eight healthcare ETFs have returned more than 10% annually.

“It’s no surprise that these ETFs are doing well,” Ahmed said. “Why not invest in something that every person in the world needs every day?”

Scroll through the card show below for the top 20 medical funds of the past decade. All data is from Morningstar Direct and is current as of May 14, 2024.