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Investing in healthcare stocks

Learn the benefits and risks of investing in pharmaceuticals, biotech, health insurance and more.

The healthcare sector is large and complex. Investors must be wary of governmental regulations and political shifts before allocating funds.

What are healthcare stocks?

Healthcare stocks belong to the healthcare sector of the stock market — one of 11 sectors defined by the Global Industry Classification Standard. Companies within the healthcare sector provide medical services, including insurance, medical equipment and pharmaceuticals.
The healthcare sector is large, accounting for nearly one-fifth of the overall gross domestic product (GDP) within the US. The healthcare sector is also complex, given government and professional licensing regulations, research costs and the rapid evolution of the medical field.

What subcategories does it include?

The healthcare sector can be further divided into the following major industries:

  • Healthcare facilities. These include hospitals, clinics, laboratories, mental health facilities and nursing homes.
  • Health insurance. Companies responsible for providing and underwriting health insurance policies also belong to the healthcare sector.
  • Medical equipment. Medical equipment providers design and manufacture equipment used across the sector, from CT scanners to surgical gloves.
  • Pharmaceuticals. Biotech firms and major pharmaceutical firms work to research, develop and distribute generic and name-brand drugs.

How to invest in the healthcare sector

There are two ways to invest in the healthcare sector: individual stocks or exchange-traded funds (ETFs). Individual stocks offer targeted investment opportunities but have limited market exposure. Sector-tracking ETFs are more diverse and less risky than individual stocks but are accompanied by expense ratios.
Before you can invest, you’ll need a brokerage account. Here’s how the investment process works:

  1. Pick a platform. Online brokerages are plentiful, so conduct your own research to find the platform best suited to your investment goals.
  2. Open an account. If you opt for a web-based brokerage account, you can complete the application process online.
  3. Fund your account. Before you can purchase securities, fund your account with an external transfer.
  4. Select your securities. Search for stocks and ETFs by sector using your platform’s research tools.
  5. Place an order. Once you’ve found a security you’d like to purchase, indicate how many you’d like to buy and submit your order.
  6. Monitor your investments. Log in to your brokerage account to track your investments.

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What stocks are in the healthcare sector?

See how the following stocks are performing, and view details like market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield.

What ETFs track the healthcare sector?

Popular ETFs in the healthcare sector include:

  • ARK Genomic Revolution ETF (ARKG)
  • Fidelity MSCI Health Care Index ETF (FHLC)
  • First Trust Amex Biotechnology Index (FBT)
  • Health Care Select Sector SPDR Fund (XLV)
  • Invesco S&P SmallCap Health Care ETF (PSCH)
  • iShares Nasdaq Biotechnology ETF (IBB)
  • iShares U.S. Healthcare ETF (IYH)
  • iShares U.S. Medical Devices ETF (IHI)
  • SPDR S&P Biotech ETF (XBI)
  • VanEck Vectors Biotech ETF (BBH)
  • Vanguard Healthcare ETF (VHT)

How is the healthcare sector performing?

The graph below tracks the Health Care Select Sector SPDR Fund (XLV). Tracking ETF performance is one way to measure how the sector as a whole is doing.

Why invest in healthcare stocks?

Healthcare is a human necessity. This means the demand for healthcare services typically remains unchanged, regardless of how other industries rise and fall. Investing in well-established healthcare stocks can provide a cushion of security in an aggressive-growth portfolio.
Healthcare stocks also offer investors the opportunity to fund medical research. As the field continues to expand, investors can support research efforts seeking to cure disease.

What unique risks does the healthcare sector face?

The medical field is complicated, and if you don’t understand what a company does or how it operates, you may want to think twice before investing.
Government legislation is another major consideration for healthcare investors. Sweeping shifts in policy — the Affordable Care Act, for example — have the power to trigger significant volatility in this sector. And the FDA has the power to make or break fledgling pharmaceutical companies. If you choose to invest in this sector, keep an eye on political shifts and regulatory changes.

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What is the Finder Score?

The Finder Score crunches 147 key metrics we collected directly from 18+ brokers and assessed each provider’s performance based on nine different categories, weighing each metric based on the expertise and insights of Finder’s investment experts. We then scored and ranked each provider to determine the best brokerage accounts.

We update our best picks as products change, disappear or emerge in the market. We also regularly review and revise our selections to ensure our best provider lists reflect the most competitive available.

Read the full Finder Score breakdown

Bottom line

The healthcare sector offers the opportunity for profit but carries its own unique set of risks. Whether or not this sector belongs in your portfolio depends on your risk tolerance and investment goals. Explore your brokerage account options across multiple trading platforms for the account best suited to your needs.

Frequently asked questions

Paid non-client promotion. Finder does not invest money with providers on this page. If a brand is a referral partner, we're paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Learn more about how we make money.

Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.

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Editor

Shannon Terrell is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in personal finance. Her writing and analysis on investing and banking has been featured in Bloomberg, Global News, Yahoo Finance, GoBankingRates and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga. See full bio

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has written 160 Finder guides across topics including:
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