- Introducing ASX healthcare ETFs
- What does the healthcare sector include?
- What are ETFs?
- Where do international funds come in?
- Top healthcare ETFs
- iShares Global Healthcare ETF
- Vaneck Vectors Global Healthcare Leaders
- Betashares Digital Health and Telemedicine ETF
- How to invest in ETFs in Australia
- Pros of investing in healthcare ETFs
- And the cons
- Are ASX healthcare ETFs right for you?
Introducing ASX healthcare ETFs
ASX healthcare ETFs are exchange-traded funds (ETFs) listed on the ASX that invest in healthcare companies.
These ETFs are generally designed to track the performance of a specific healthcare sector index, such as the S&P/ASX 200 Health Care Index (ASX: XHJ).
The index includes healthcare service providers, medical equipment companies, pharmaceuticals, and biotechnology.
What does the healthcare sector include?
The healthcare sector is broad and complex and includes a diverse range of companies that provide medical products and services. Here, we explore some of the sub-sectors.
- Pharmaceuticals: Includes companies that discover, develop, manufacture, and market drugs and therapies to prevent, treat, or cure diseases.
- Biotechnology: Companies that use biological processes to develop new drugs and treatments. Some may focus on areas such as genetic engineering and gene therapy.
- Medical devices and equipment: Those involved in manufacturing and distributing medical equipment and devices such as surgical instruments, diagnostic imaging equipment, and implantable devices.
- Healthcare service providers: These include hospitals, clinics, nursing homes, and home healthcare providers.
- Healthcare IT: Companies that develop and provide technology solutions for the healthcare industry, including electronic health records, telemedicine, and healthcare analytics.
- Health insurance providers: Companies that provide health insurance coverage to individuals and groups.
Healthcare is considered a defensive sector, as demand for healthcare products and services tends to remain relatively stable during economic downturns or market volatility.
What are ETFs?
ETFs are investment funds that trade on stock exchanges like individual shares. They hold a basket of underlying assets, such as shares, bonds, or commodities, and often aim to replicate the performance of a specific index or asset class.
Exchange-traded funds are a cost-effective way to diversify a portfolio and offer investors easy access to various assets.
ETFs have gained in popularity over the last couple of decades. There are now more than 200 listed on the ASX, providing exposure to everything from gold to biotechnology companies. This makes ETFs an economical way of investing in specific industries and investment themes.
Where do international funds come in?
Most healthcare ETFs in Australia have a global focus, meaning they invest in international healthcare companies, not just those listed on the ASX.
This makes healthcare ETFs an excellent way to gain exposure to the global healthcare sector. It provides additional diversification because holdings are spread geographically and between individual companies.
There are also many healthcare ETFs listed on stock exchanges outside Australia. Investing in international ETFs requires an account with a brokerage that offers access to global markets. It also means your investment will be exposed to changes in currency exchange rates which will impact how much your investment is worth.
Top healthcare ETFs
Some ASX healthcare ETFs, such as Betashares Global Healthcare ETF (ASX: DRUG), have broad global exposure. It seeks to track the performance of the Nasdaq Global ex-Australia Healthcare Index and exposes investors to companies in the pharmaceuticals, biotechnology, medical equipment, and healthcare services sectors.
Others offer exposure to specific healthcare sectors. For instance, the VanEck Vectors Australian Biotech ETF (ASX: ACURE) focuses on Australian biotechnology companies.
| ETF | Description |
| iShares Global Healthcare ETF (ASX: IXJ) | Holds global equities in the healthcare sector. |
| Vaneck Vectors Global Healthcare Leaders ETF (ASX: HLTH) | Provides exposure to a diversified portfolio of the largest international companies from the global healthcare sector. |
| Betashares Digital Health and Telemedicine ETF (ASX: EDOC) | Comprises a portfolio of leading global digital healthcare companies. |
iShares Global Healthcare ETF
This ETF seeks to track the investment results of the S&P Global 1200 Healthcare Sector Index, which comprises global equities in the healthcare sector. It provides exposure to pharmaceutical, biotech, and medical device companies such as Johnson & Johnson (NYSE: JNJ), Merck & Co Inc (NYSE: MRK), and Pfizer Inc (NYSE: PFE).
Vaneck Vectors Global Healthcare Leaders
This ETF tracks the investment results of the MarketGrader Developed Markets (ex-Australia) Health Care Index, comprising 50 fundamentally sound companies with the best growth-at-a-reasonable-price attributes in the healthcare sector from developed markets excluding Australia. Holdings include Moderna Inc (NASDAQ: MRNA), Novo Nordisk, and Sonova Holding.
Betashares Digital Health and Telemedicine ETF
This ETF focuses on the NASDAQ CTA Global Digital Health Index, which tracks the performance of companies involved in developing and implementing digital health technologies. The index measures the performance of companies focused on healthcare technology, including medical devices, healthcare software, and healthcare IT services. ETF holdings include DexCom Inc (NASDAQ: DXCM), Resmed Inc (ASX: RMD), and Masimo Corp (NASDAQ: MASI).
How to invest in ETFs in Australia
Investing in ETFs in Australia is relatively straightforward – investors can purchase ETFs through a stockbroker or online trading platform. To invest in ETFs, you must select a brokerage and open an account.
Research ETFs listed on the ASX and select one that aligns with your investment goals and risk tolerance. Once you choose your preferences, you can place an order through your brokerage's online trading platform. After you have purchased an ETF, monitor it regularly to ensure it continues to align with your investment goals.
Pros of investing in healthcare ETFs
Diversification: Healthcare ETFs invest in various companies within the healthcare sector, providing investors with diversification and reducing their exposure to any single company.
Growth potential: The healthcare sector is considered a growth sector due to factors such as an aging population, increasing demand for healthcare services, and technological advancements. As a result, healthcare ETFs may have the potential for long-term growth.
Low cost: ETFs are typically low-cost investment vehicles with lower fees than mutual funds. This makes them a cost-effective way to invest in the healthcare sector.
Accessible: ETFs trade on stock exchanges just like individual stocks, making them easy to buy and sell anytime during trading hours.
And the cons
Regulatory risk: The healthcare sector is highly regulated and subject to changes that can impact company returns.
Concentration risk: Some healthcare ETFs may be heavily invested in a small number of companies or a particular subsector of the healthcare industry, which can increase concentration risk.
Stock-specific risks: individual companies within the sector can be impacted by clinical trial results, patent expirations, drug pricing reforms, or other company-specific events.
Market fluctuations: Like all investments, healthcare ETFs can be impacted by market fluctuations and economic conditions, which can cause their value to decrease.
Are ASX healthcare ETFs right for you?
Whether ASX healthcare ETFs are a good investment depends on your investment goals, risk tolerance, and time horizon.
If you're looking for a way to gain exposure to the healthcare sector, ASX healthcare ETFs can offer diversification, low fees, and exposure to a stable and growing sector.
However, before investing in any ETF, it's essential to do your research and investigate whether a potential investment fits your goals and timelines.
