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

Very liquid and widely heldBroad exposure across healthcare subsectorsStrong historical performance as a defensive playHeavily weighted toward large caps (less small-cap upside)Sector-specific risks still apply

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

Extremely diversified healthcare exposureLow expense ratioGood mix of growth and stabilityStill concentrated in US healthcareCosts, while low, are higher than XLV

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

Strong exposure to biotech growthIncludes many innovative, high-potential companiesGood liquidityHigher volatility than broad healthcare ETFsSensitive to biotech swings and regulatory news

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

Equal-weight structure reduces mega-cap dominanceBroader representation of biotech firmsPotentially higher growth when smaller names outperformVery volatile compared to sector-wide fundsMore sensitive to biotech sector downturns

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

Broad US healthcare exposureGood balance of defensive and growth stocksLower turnoverSimilar to XLV — may overlap with other broad fundsLimited international exposure

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

Diversified across global healthcare leadersHelps hedge against regional market downturnsInternational currency riskCan have higher tracking error vs US funds

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

Low costWide sector coveragePassive, transparent approachSimilar to Vanguard and iShares broad fundsMay lag in strong biotech rallies

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.