Better Healthcare ETF: Vanguard's Broad VHT vs. the iShares Biotechnology-Focused IBB
Key Points
The Vanguard Health Care ETF offers a broad healthcare focus with a significantly lower expense ratio of 0.09% compared to its peer.
The iShares Biotechnology ETF saw a higher 1-year total return but has experienced a much deeper maximum drawdown over the last five years.
The Vanguard Health Care ETF provides a higher dividend yield of 1.4% while the biotechnology-focused fund pays 0.2%.
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Comparing the Vanguard Health Care ETF (NYSEMKT:VHT) and iShares Biotechnology ETF (NASDAQ:IBB) involves weighing a broad, low-cost healthcare core against a more concentrated, higher-fee play on biotechnology innovation.
Both funds provide exposure to the healthcare sector, yet they serve different roles. The Vanguard fund captures the entire industry, from pharmaceutical giants to medical device makers, while the iShares fund zooms in on biotech companies engaged in drug discovery and genetic research.
Snapshot (cost & size)
| Metric | IBB | VHT |
|---|---|---|
| Issuer | iShares | Vanguard |
| Share price | $210.71 (as of 2026-09-28) | $320.74 (as of 2026-09-28) |
| Expense ratio | 0.44% | 0.09% |
| 1-yr return (as of 2026-09-28) | 49.8% | 22.5% |
| Dividend yield | 0.2% | 1.4% |
| Beta | 0.70 | 0.58 |
| AUM | $10.7 billion | $22.0 billion |
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-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Vanguard Health Care ETF is considerably more affordable with a 0.09% expense ratio, while the iShares Biotechnology ETF charges 0.44%. Income-focused investors may prefer the Vanguard fund's higher payout.
Performance & risk comparison
| Metric | IBB | VHT |
|---|---|---|
| Max drawdown (5 yr) | (39.8%) | (17.7%) |
| Growth of $1,000 over 5 years (total return) | $2,224 | $828 |
What's inside
The Vanguard Health Care ETF manages a broad portfolio of 411 holdings, covering medical services, technology, and equipment providers. Its largest positions include Eli Lilly & Co (NYSE:LLY) at 12.82%, Johnson & Johnson (NYSE:JNJ) at 8.74%, and AbbVie Inc (NYSE:ABBV) at 6.27%. The fund was launched in 2004, and has paid $4.61 per share over the trailing 12 months, which on its recent ~$320.7 share price works out to a 1.4% yield.
The iShares Biotechnology ETF focuses specifically on the biotechnology sector with 243 holdings. Its top holdings include Gilead Sciences (NASDAQ:GILD) at 8.16%, Vertex Pharmaceuticals (NASDAQ:VRTX) at 7.65%, and Amgen Inc (NASDAQ:AMGN) at 7.53%. The fund was launched in 2001, and has paid $0.34 per share over the trailing 12 months, which on its recent ~$210.7 share price works out to a 0.2% yield.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
Investors looking for exposure to healthcare stocks have two distinct choices in the Vanguard Health Care ETF (VHT) and the iShares Biotechnology ETF (IBB). The former's broad holdings across different segments of the industry offers greater diversification, while the latter's focus on biotech promises outsized returns. Which to pick depends on your risk tolerance.
Investors with a high risk tolerance seeking growth stocks may want to pick IBB. With over 200 holdings, this biotech ETF provides greater exposure to the sector than trying to analyze and buy individual stocks, and increases your opportunity for outstanding returns, as demonstrated by the fund's one-year and five-year performance. However, that comes with more volatility, since regulatory or clinical setbacks can cause IBB's performance to suddenly drop. This can be seen in its far larger max drawdown.
For investors looking for more stability, VHT is the ETF to pick. It's a solid fund to hold over the long term, thanks to its low expense ratio combined with its far higher dividend yield.
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Robert Izquierdo has positions in Amgen and Johnson & Johnson. The Motley Fool has positions in and recommends AbbVie, Amgen, Eli Lilly, Gilead Sciences, and Vertex Pharmaceuticals. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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