Adding a Healthcare Stock to Your Portfolio? FHLC Offers Broad Coverage While PPH Leads in Returns.
Key Points
Fidelity MSCI Health Care Index ETF offers a significantly lower expense ratio and a larger assets under management total than VanEck Pharmaceutical ETF.
While the Fidelity MSCI Health Care Index ETF provides broad sector diversification across more than 300 holdings, the VanEck Pharmaceutical ETF focuses on a concentrated basket of 26 industry leaders.
VanEck Pharmaceutical ETF has delivered higher total returns over the last year and five years while maintaining a lower beta profile than the Fidelity MSCI Health Care Index ETF.
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Healthcare remains a cornerstone of many long-term portfolios, offering a mix of defensive stability and growth potential through innovation. Investors must decide whether to cast a wide net across the entire sector with a fund like the Fidelity MSCI Health Care Index ETF (NYSEMKT:FHLC) or zoom in on the specific economics of drug manufacturing with an investment in VanEck Pharmaceutical ETF (NASDAQ:PPH). This comparison examines how these two approaches differ in cost, volatility, and dividend performance.
Snapshot (cost & size)
| Metric | PPH | FHLC |
|---|---|---|
| Issuer | VanEck | Fidelity |
| Expense ratio | 0.36% | 0.08% |
| 1-yr return (as of 5/29/26) | 22.4% | 17% |
| Dividend yield | 2.1% | 1.4% |
| Beta | 0.47 | 0.64 |
| AUM | $873.4 million | $2.9 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
FHLC is significantly more affordable with an expense ratio of 0.08% compared to 0.36% for PPH. However, PPH has offered a higher payout, with a trailing-12-month dividend yield of 2.10% versus 1.40% for the Fidelity fund.
Performance & risk comparison
| Metric | PPH | FHLC |
|---|---|---|
| Max drawdown (5 yr) | (20.3%) | (17.7%) |
| Growth of $1,000 over 5 years (total return) | $1,599 | $1,252 |
What's inside
The Fidelity MSCI Health Care Index ETF tracks the MSCI USA IMI Health Care Index, which provides broad exposure to the domestic healthcare sector. Its approximately 340 holdings cover a wide swath of the healthcare sector, including segments like biotechnology and medical services. Its largest positions include Eli Lilly at 11.2%, Johnson & Johnson at 9%, and AbbVie at 6.05%. Launched in 2013, the fund has a trailing-12-month dividend of $1.01 per share.
The VanEck Pharmaceutical ETF seeks to track the MVIS US Listed Pharmaceutical 25 Index, focusing specifically on companies involved in drug research, production, and sales. It is significantly more concentrated, with 26 holdings and a focus on industry leaders. Its largest holdings include Eli Lilly at 22.4%, Novartis AG at 10.4%, and Merck at 9.4%. Launched in 2011, it paid $2.15 per share over the trailing 12 months.
For more guidance on ETF investing, check out the full guide at this link.
What it means for investors
Deciding between the FHLC and PPH ETFs first comes down to your interests and conviction within the healthcare sector. If you’re looking for broad, balanced exposure to the entire sector, FHLC makes sense. It’s significantly more affordable in terms of fees and provides exposure to 340 companies representing several different healthcare industries. This broad base also mitigates some downside risk.
PPH is a play on just one segment of the healthcare sector, pharmaceuticals, with only 26 holdings. Its one- and five-year returns are higher than FHLC’s, and its dividend yield is also more attractive. The pharmaceuticals segment of the healthcare sector can be a dynamic space for investors, with stocks rising and falling on clinical trial results, pipeline updates, and, sometimes, macro factors such as the COVID-19 pandemic.
Ultimately, investors will have to decide between FHLC’s stability and lower fees vs. PPH’s higher returns, better payout, and greater concentration risk. Both of these funds have underperformed the S&P 500’s 94% gain over the past five years, so interested investors would be well served to add healthcare exposure to a diversified portfolio.
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Sarah Sidlow has positions in Johnson & Johnson. The Motley Fool has positions in and recommends AbbVie, Eli Lilly, and Merck. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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