Which Healthcare ETF Is the Better Buy: Vanguard's VHT or Fidelity's FHLC?

The Vanguard Health Care ETF (NYSEMKT:VHT) and the Fidelity MSCI Health Care Index ETF (NYSEMKT:FHLC) provide nearly identical core exposure to the U.S. healthcare market with distinct differences in asset scale and expense structure.

Investors seeking broad healthcare exposure often compare VHT and FHLC. Both ETFs track market-cap-weighted indexes of U.S. healthcare stocks, providing a diverse mix of pharmaceuticals, biotechnology, and medical equipment providers. While they target the same market segment, variations in liquidity, fund age, and underlying index methodology may influence which fund fits a particular portfolio strategy.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Fidelity fund is marginally more affordable for long-term holders with its 0.08% expense ratio, whereas the Vanguard fund charges 0.09%. While this 0.01 percentage point gap is small, it reflects different pricing strategies. Furthermore, the Vanguard fund currently offers a higher payout, with a 0.26 percentage point lead in dividend yield over its Fidelity counterpart.

Performance & risk comparison

What's inside

Vanguard Health Care ETF (NYSEMKT:VHT) holds 411 stocks across the healthcare sector, encompassing pharmaceuticals, healthcare equipment, and biotechnology companies. Its largest positions include Eli Lilly (NYSE:LLY) at 14.19%, Johnson & Johnson (NYSE:JNJ) at 8.89%, and AbbVie (NYSE:ABBV) at 6.56%. The fund was launched in 2004. Vanguard Health Care ETF has paid $4.72 per share over the trailing 12 months, which on its recent ~$299.49 share price works out to a 1.60% yield.

Fidelity MSCI Health Care Index ETF (NYSEMKT:FHLC) maintains a similar portfolio with 365 holdings and focuses entirely on the healthcare sector. Its largest positions include Eli Lilly at 13.77%, Johnson & Johnson at 8.86%, and AbbVie at 6.55%. The fund was launched in 2013. Fidelity MSCI Health Care Index ETF has paid $1.02 per share over the trailing 12 months, which on its recent ~$77.43 share price works out to a 1.30% yield.

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What this means for investors

Few sectors are moving as fast as healthcare right now. GLP-1 drugs have reshaped metabolic medicine, biopharma M&A hit its strongest quarter since 2020 earlier this year, and the FDA continues to approve new treatments at a steady pace despite leadership changes. For investors who want exposure to that momentum without picking individual stocks, VHT and FHLC are two of the most efficient vehicles available.

The honest answer about choosing between them is that it barely matters. Over the past decade, VHT and FHLC have delivered virtually identical returns, moving in near-perfect lockstep. The fee difference between them amounts to one basis point, roughly one dollar annually on a $10,000 investment.

VHT manages six times the assets of FHLC, giving it deeper liquidity and a longer institutional track record. FHLC has a marginal cost edge and is the natural home for Fidelity platform investors. For most long-term investors, the more important decision is owning a healthcare fund at all, not which of these two nearly identical options to choose. Healthcare's blend of defensive stability and genuine innovation momentum makes it one of the more attractive sector allocations available to long-term investors right now.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Eli Lilly. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.