SPDR Health Care ETF Tops iShares Biotech in Long-Term Returns
Key Points
State Street Health Care Select Sector SPDR ETF offers a significantly lower expense ratio of 0.08% compared to 0.44% for iShares Biotechnology ETF.
iShares' ETF provides concentrated exposure to 248 biotechnology stocks while the SPDR fund holds 59 diverse healthcare names.
The SPDR ETF has achieved higher historical total returns and lower volatility over the past five years compared to iShares' ETF.
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Investors seeking broad, low-cost healthcare exposure may prefer State Street Health Care Select Sector SPDR ETF (NYSEMKT:XLV), while iShares Biotechnology ETF (NASDAQ:IBB) caters to those specifically targeting the high-growth biotechnology subsector.
Both funds provide exposure to the healthcare space, but they operate with different investment scopes. Selecting between them requires weighing the growth potential of advanced therapies against the stability of diversified medical giants. XLV tracks the Health Care Select Sector Index, encompassing pharmaceutical giants and service providers within the S&P 500.
Snapshot (cost & size)
| Metric | IBB | XLV |
|---|---|---|
| Issuer | iShares | SPDR |
| Share price (as of June 30, 2026) | $190.19 | $158.66 |
| Expense ratio | 0.44% | 0.08% |
| 1-yr return (as of June 30, 2026) | 50.7% | 19.8% |
| Dividend yield | 0.2% | 1.6% |
| Beta | 0.70 | 0.56 |
| AUM | $9.1 billion | $40.6 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.
The State Street fund is more affordable for long-term holders, carrying an expense ratio of 0.08% versus the 0.44% charged by the iShares ETF. Furthermore, the SPDR fund provides a notably higher payout.
Performance & risk comparison
| Metric | IBB | XLV |
|---|---|---|
| Max drawdown (5 yr) | (39.8%) | (17.1%) |
| Growth of $1,000 over 5 years (total return) | $1,167 | $1,354 |
The SPDR ETF provides broad exposure to the healthcare sector. Its holdings count stands at 59, and its largest positions include Eli Lilly (NYSE:LLY) at 16.72%, Johnson & Johnson (NYSE:JNJ) at 10.7%, and AbbVie (NYSE:ABBV) at 7.72%. The fund was launched in 1998. It has paid $2.53 per share in dividends over the trailing 12 months, which on its recent ~$158.66 share price works out to a 1.6% yield.
iShares’ fund focuses specifically on the biotechnology industry. Its largest positions include Vertex Pharmaceuticals (NASDAQ:VRTX) at 8.14%, Amgen (NASDAQ:AMGN) at 7.81%, and Gilead Sciences (NASDAQ:GILD) at 6.85%. It holds 248 positions, offering a more granular reach into smaller biotech companies. The fund was launched in 2001. It has paid $0.41 per share in dividends over the trailing 12 months, which on its recent ~$190.19 share price works out to a 0.2% yield.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
I would say, broadly speaking, XLV is the Steady Eddie of this pair. Its five-year returns are higher, it has a lower max drowdown, and it offers a lower expense ratio. It's less diversified, but that sword cuts both ways; a lot of small biotechs are pre-revenue, and often depend on binary outcomes, relying on just one or two drugs to succeed. IBB has more exposure to these smaller biotech businesses. Conversely, the stocks in XLV's portfolio are all S&P 500 constituents, so they're large and established.
I think there's one small detail worth noting: XLV has a comparatively higher concentration risk. The SPDR fund's top three holdings account for 35% of the portfolio, while IBB's top three only make up about 23%. But the companies in question -- Eli Lilly, J&J, and AbbVie -- are blue chip names, so that concentration may be less of a concern for some investors.
Finally, XLV and IBB have a wide gulf in terms of assets under management. Accordingly, this is reflected in their average trading volume, so folks who value liquidity may prefer XLV.
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Erin Kennedy has no position in any of the stocks mentioned. 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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