Better Healthcare ETF: Fidelity's Broad, Low-Cost FHLC vs. State Street's XBI Targeting Biotech
Key Points
The Fidelity MSCI Health Care Index ETF offers a significantly lower expense ratio and a more diversified portfolio than the State Street SPDR S&P Biotech ETF.
The State Street SPDR S&P Biotech ETF experienced a much deeper maximum drawdown over the last five years but outperformed on a 1-year total return basis.
The Fidelity MSCI Health Care Index ETF concentrates on large-cap pharmaceutical giants while the State Street S&P Biotech ETF targets specialized biotechnology companies.
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The Fidelity MSCI Health Care Index ETF (NYSEMKT:FHLC) provides broad, low-cost exposure to the entire healthcare sector, whereas the State Street SPDR S&P Biotech ETF (NYSEMKT:XBI) offers a narrower, more volatile focus on biotechnology.
Both funds target the healthcare space but with different strategies. The Fidelity fund uses a market-cap-weighted approach across the broad industry, while the State Street fund utilizes an equal-weighted index to capture the potential growth of smaller biotechnology companies.
Snapshot (cost & size)
| Metric | XBI | FHLC |
|---|---|---|
| Issuer | State Street | Fidelity |
| Share price | $156.61 (as of 2026-09-28) | $82.92 (as of 2026-09-28) |
| Expense ratio | 0.35% | 0.08% |
| 1-yr return (as of 2026-09-28) | 81.5% | 27.8% |
| Dividend yield | 0.3% | 1.2% |
| Beta | 1.12 | 0.58 |
| AUM | $11.2 billion | $3.5 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 Fidelity fund is significantly more affordable with an expense ratio of just 0.08%, compared to 0.35% for the State Street fund. It also offers a higher payout, yielding 1.2% versus 0.3% for its counterpart.
Performance & risk comparison
| Metric | XBI | FHLC |
|---|---|---|
| Max drawdown (5 yr) | (63.9%) | (17.7%) |
| Growth of $1,000 over 5 years (total return) | $1,489 | $1,245 |
What's inside
The Fidelity MSCI Health Care Index ETF holds 365 positions across healthcare and technology. Its largest positions include Eli Lilly & Co (NYSE:LLY) at 13.10%, Johnson & Johnson (NYSE:JNJ) at 9.02%, and Abbvie Inc (NYSE:ABBV) at 6.49%. The fund was launched in 2013, and has paid $1.02 per share over the trailing 12 months, which on its recent ~$82.9 share price works out to a 1.2% yield.
The State Street SPDR S&P Biotech ETF contains 165 holdings primarily in healthcare and financial services. Top holdings include Moderna Inc (NASDAQ:MRNA) at 2.10%, Twist Bioscience Corp (NASDAQ:TWST) at 2.07%, and Natera Inc (NASDAQ:NTRA) at 1.80%. The fund was launched in 2006, and has paid $0.54 per share over the trailing 12 months, which on its recent ~$156.6 share price works out to a 0.3% yield.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
The Fidelity MSCI Health Care Index ETF (FHLC) and the State Street SPDR S&P Biotech ETF (XBI) offer different approaches to investing in the healthcare sector. Which to pick depends on whether you want to target biotechnology stocks specifically, or prefer exposure to a variety of healthcare companies, including biotech businesses.
XBI is for investors who are comfortable with the high-risk, high-reward biotech niche. The fund delivered an outstanding one-year return, but a much larger max drawdown in a sign of its volatility. XBI can outperform or fall suddenly because the biotech sector is sensitive to regulatory and clinical wins or setbacks. The ETF's equal-weight strategy reduces single-stock dominance, which can be good if a smaller company achieves a treatment breakthrough, but can hurt performance if the opposite is true.
FHLC is the better ETF for conservative investors. It offers greater stability, a superior dividend yield, and a lower expense ratio. That said, its market-cap-weighted approach means its largest holdings can have an outsized impact on fund performance.
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Robert Izquierdo has positions in Johnson & Johnson. The Motley Fool has positions in and recommends AbbVie, Eli Lilly, Moderna, Natera, and Twist Bioscience. The Motley Fool recommends Johnson & Johnson and SPDR Series Trust - SPDR S&P Biotech ETF. The Motley Fool has a disclosure policy.
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