7 Best Healthcare ETFs for Long-Term Investors

Healthcare ETFs (exchange-traded funds) let investors gain diversified exposure to the health sector — from biopharmaceutical companies to medical equipment manufacturers — through a single product. Because healthcare demand tends to grow over time (thanks to ageing populations, ongoing innovation and consistent spending), these ETFs can be excellent long-term holdings in a diversified investment portfolio.

This article explores 7 top healthcare ETFs so you can decide which best fits your investment style:

1. Health Care Select Sector SPDR Fund (XLV)

Overview: The XLV ETF tracks the Health Care Select Sector Index, which is a broad basket of US healthcare companies spanning pharmaceuticals, biotechnology, medical equipment and managed care. It’s one of the most popular healthcare ETFs by assets and liquidity.

Why Long-Term Investors Like It:

• Offers broad exposure to major healthcare players

• Focuses on established, lower-volatility companies

Pros and Cons

2. Vanguard Health Care ETF (VHT)

Overview: VHT tracks the performance of a broad US healthcare index that includes large, mid and small caps. It’s known for low costs and diversified sector exposure.

Why It’s Great for Long-Term Investing: VHT spreads investments across hundreds of healthcare companies from established blue chips to emerging players.

Pros and Cons

3. iShares Biotechnology ETF (IBB)

Overview: IBB tracks the Nasdaq Biotechnology Index, giving investors access to biotech and pharmaceutical companies listed on the Nasdaq exchange.

Why It’s Attractive: This ETF is suited to growth-oriented investors who want targeted exposure to drug development and biotech innovation.

Pros and Cons

4. SPDR S&P Biotech ETF (XBI)

Overview: Unlike IBB, XBI is equal-weighted. This means that each holding is roughly the same size rather than weighted by market cap. This can increase exposure to smaller biotech firms.

Why Investors Choose It: Equal weighting helps avoid overconcentration in a few large companies and gives more balanced biotech coverage.

Pros and Cons

5. iShares U.S. Healthcare ETF (IYH)

Overview: IYH tracks a broad index of US healthcare equities, including medical equipment makers, drug companies and health services.

Why It’s Worth Considering: It provides a wide lens on the US healthcare landscape without focusing on a single niche.

Pros and Cons

6. iShares Global Healthcare ETF (IXJ)

Overview: IXJ expands the lens beyond the US by tracking global healthcare companies in developed markets.

Why Global Exposure Matters: For long-term investors, diversifying healthcare holdings beyond the US offers potential growth and risk mitigation.

Pros and Cons

7. Fidelity MSCI Health Care Index ETF (FHLC)

Overview: FHLC tracks the MSCI US Health Care Inde. This is a broad measure of US healthcare stocks including pharmaceuticals and services.

Why It’s a Solid All-Around Choice: It offers a low-cost way to invest in a wide range of healthcare companies.

Pros and Cons

How to Choose the Right Healthcare ETF

When deciding which healthcare ETF fits your long-term goals, consider:

• Risk tolerance: Biotech-focused funds like IBB and XBI are higher risk but offer more growth potential.

• Diversification: Broad funds like XLV and VHT spread your exposure across multiple subsectors.

• Geographic focus: IXJ brings global perspective, while others focus mainly on U.S. stocks.

Final Thoughts

Healthcare ETFs can be valuable core or satellite holdings for a long-term investing strategy. They provide diversified access to a sector supported by structural trends like ageing populations, consistent demand for medical services, and technological innovation. By weighing each ETF’s strategy, holdings and risk profile, you can build a healthcare slice of your portfolio aligned with your goals.