Should You Bet Big on Drugmakers? VanEck Pharmaceutical ETF vs. Invesco Healthcare ETF Compared.

The Invesco S&P 500 Equal Weight Health Care ETF (NYSEMKT:RSPH) offers broad, equal-weighted sector exposure, while the VanEck Pharmaceutical ETF (NASDAQ:PPH) provides a cheaper, concentrated play on global drug manufacturers.

Healthcare investors often choose between targeted subsectors or broad industry diversification. These two funds represent different paths: The VanEck fund homes in on pharmaceutical giants, whereas the Invesco fund equal-weights the entire healthcare spectrum within the S&P 500 to mitigate single-stock concentration.

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 VanEck fund is slightly more affordable with a 0.36% expense ratio. It also provides a higher payout for income seekers, with a yield gap of 1.24 percentage points over the Invesco fund.

Performance & risk comparison

What's inside

The Invesco S&P 500 Equal Weight Health Care ETF holds 60 positions across the healthcare (98%) and technology (2%) sectors. Its largest positions include Moderna at 4.4%, Veeva Systems at 2.4%, and Charles River Laboratories International at 2.2%. It was launched in 2006. Invesco S&P 500 Equal Weight Health Care ETF has paid $0.23 per share over the trailing 12 months, which on its recent ~$37.61 share price works out to a 0.6% yield.

The VanEck Pharmaceutical ETF is fully focused on healthcare at 100% and holds 26 positions. Its largest positions include Eli Lilly & Co at 18.95%, Merck & Co at 11.2%, and Novartis at 9.3%. It was launched in 2011. VanEck Pharmaceutical ETF has paid $2.17 per share over the trailing 12 months, which on its recent ~$114.06 share price works out to a 1.9% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

In this match-up, PPH seems to check all the boxes. It's slightly less expensive than RSPH with a higher dividend yield and a much larger portfolio of assets under management, granting it both stability and liquidity. Its one- and five-year returns beat RSPH's with lower risk. But choosing PPH means going all-in on drug manufacturers, and just 26 of them at that. These are the largest, most liquid pharmaceutical companies, and the fund has global exposure, but industry-related risks, like high research and development (R&D) expenses, regulatory risks, and patent expiry concerns, remain.

RSPH's structure mitigates many of those concerns, with 60 positions across the healthcare spectrum, all equally weighted to reduce the risks of single-stock concentration. It also pays a modest dividend and has returned a respectable 29% over the last year, beating the S&P 500. Healthcare is a relatively resilient market sector and can be a defensive position in your portfolio. People need medical treatment regardless of economic conditions, and the aging population in America ensures the sector will experience both demand and growth over the next few decades.

If you're a long-term investor seeking growth and yield, and are comfortable with a concentration in the pharmaceutical industry, PPH could be a strong choice. If you're looking for a broader play on the healthcare field, you may be more comfortable with RSPH's portfolio.

Sarah Sidlow has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly, Merck, Moderna, and Veeva Systems. The Motley Fool has a disclosure policy.