The Vanguard Health Care ETF (VHT) is highlighted as a diversified investment vehicle for healthcare sector exposure, demonstrating 5-year, 10-year, and 15-year average annual returns of 7.06%, 9.58%, and 12.85% respectively. Its largest holding, Eli Lilly (10.16% weight), has been a significant contributor, achieving over 42% annual gains in the past five years driven by its leadership in weight-loss drugs, though VHT has underperformed the broader S&P 500 over these periods.
If a millennial were to ask me what healthcare stock they might buy in order to get rich, I could think of several to name. But as with most stocks, I couldn't be confident that they'd still be performing at a high level a decade or two hence. So I think my best answer would be to consider investing in a healthcare-focused exchange-traded fund (ETF). An ETF is a fund that trades like a stock, and there are plenty that are full of healthcare stocks. A particularly promising one is the Vanguard Health Care ETF (VHT 1.13%). The table below shows how it has performed lately, along with the performance of a low-fee S&P 500 ETF for comparison: | ETF | 5-Year Avg. Annual Return | 10-Year Avg. Annual Return | 15-Year Avg. Annual Return | |---|---|---|---| | Vanguard Health Care ETF | 7.06% | 9.58% | 12.85% | | Vanguard S&P 500 ETF (NYSEMKT: VOO) | 16.38% | 15.27% | 14.60% | You'll see that it hasn't quite kept up with the S&P 500 index, but then that index is full of monster tech stocks such as Nvidia and Broadcom. NYSEMKT: VHT Key Data Points Here's what's in the healthcare ETF -- its top 10 holdings out of 400 -- as of Aug. 31: | Stock | Weight in ETF | |---|---| | Eli Lilly | 10.16% | | AbbVie | 5.38% | | Johnson & Johnson | 5.07% | | UnitedHealth Group | 4.55% | | Abbott Laboratories | 3.97% | | Merck | 3.64% | | Thermo Fisher Scientific | 3.20% | | Intuitive Surgical | 2.92% | | Boston Scientific | 2.69% | | Amgen | 2.66% | Eli Lilly is by far the biggest holding, and that's not surprising, given its leadership in the very popular arena of weight loss drugs: It has averaged astounding gains of more than 42% annually over the past five years. If you're bullish on the future of healthcare businesses, it makes sense to consider this ETF for your portfolio. If you're not sure, consider an S&P 500 index ETF instead -- as it will encompass many healthcare stocks, along with a wide range of others. The Vanguard Health care ETF (VHT) is positioned as a vehicle for long-term, diversified exposure to the healthcare sector, though its performance has lagged the broader market. Over 5, 10, and 15-year periods, VHT delivered average annual returns of 7.06%, 9.58%, and 12.85%, respectively, trailing the Vanguard S&P 500 ETF's (VOO) returns of 16.38%, 15.27%, and 14.60% over the same timeframes. This underperformance is noted despite the inclusion of 400 stocks, suggesting that the drag from the broader healthcare basket has outweighed the gains from top performers. The fund's composition reveals a significant concentration risk, with Eli Lilly (LLY) accounting for 10.16% of the ETF's weight. This single holding has been a primary driver of recent fund dynamics, having achieved average annual gains of over 42% in the last five years, largely due to its dominance in the weight-loss drug market. Consequently, while VHT offers sector diversification, its returns are disproportionately influenced by the performance and market sentiment surrounding LLY.
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