As Healthcare Rallies Is the Vanguard Health Care ETF of the Invesco Pharmaceuticals ETF the Better Fund for 2026?
Key Points
Vanguard Health Care ETF offers a lower expense ratio and higher dividend yield than Invesco Pharmaceuticals ETF
Invesco Pharmaceuticals ETF has concentrated its portfolio in 29 pharmaceutical stocks whereas Vanguard Health Care ETF holds 411 healthcare companies
Invesco Pharmaceuticals ETF significantly outperformed on a 1-year total return basis
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Vanguard Health Care ETF (NYSEMKT:VHT) and Invesco Pharmaceuticals ETF (NYSEMKT:PJP) differ primarily in scope and cost, as the Vanguard fund provides broad sector coverage for a fraction of the Invesco fund price.
Healthcare investors often choose between broad sector exposure and thematic niches. The Vanguard fund provides a wide net across the entire industry, whereas the Invesco fund targets the research and manufacturing segments of the U.S. drug market exclusively. The choice -- broad versus narrow -- impacts everything from volatility to income potential.
Snapshot (cost & size)
| Metric | PJP | VHT |
|---|---|---|
| Issuer | Invesco | Vanguard |
| Share price | $117.91 (as of 2026-07-20) | $299.49 (as of 2026-07-20) |
| Expense ratio | 0.57% | 0.09% |
| 1-yr return (as of July 20, 2026) | 45.10% | 25.20% |
| Dividend yield | 0.90% | 1.60% |
| Beta | 0.45 | 0.60 |
| AUM | $435.5 million | $20.4 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-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield. |
VHT is significantly more affordable, sporting an expense ratio of 0.09% compared to 0.57% for PJP. The Vanguard fund also offers a higher payout, with a yield gap of 0.68 percentage points over its peer.
Performance & risk comparison
| Metric | PJP | VHT |
|---|---|---|
| Max drawdown (5 yr) | (17.50%) | (17.70%) |
| Growth of $1,000 over 5 years (total return) | $1,540 | $1,281 |
What's inside
The Vanguard fund tracks a wide range of medical firms, holding 411 stocks, nearly all of which are in the healthcare sector. The fund’s largest positions include Eli Lilly & Co (NYSE:LLY) at 14.2%, Johnson & Johnson (NYSE:JNJ) at 8.9%, and AbbVie Inc (NYSE:ABBV) at 6.5%. It was launched in 2004. Vanguard Health Care ETF has paid $4.72 per share over the trailing 12 months, which on its recent ~$299.49 share price works out to a 1.60% yield.
In contrast, the Invesco fund focuses narrowly on just 29 stocks within the pharmaceutical space. Its top holdings include AbbVie at 5.6%, Eli Lilly at 5.4%, and Johnson & Johnson at 5.2%. The fund was launched in 2005. Invesco Pharmaceuticals ETF has paid $1.06 per share over the trailing 12 months, which on its recent ~$117.91 share price works out to a 0.90% yield.
Which fund is the better buy?
Healthcare has been on a good run the past year, as a sector it is up around 25% the past 52 weeks. Both these funds are good ways to add this sector-specific exposure to your portfolio, but they have distinct differences investors should take into account to decide which one to buy.
While the Vanguard fund, VHT, holds many more securities, the less diverse Invesco fund, PJP, has much more of its portfolio in small cap stocks, 43% of its holdings, compared to 12% for VHT. The Vanguard fund has 67% of its holdings in large-cap stocks, mostly value stocks, versus 43% for PJP. Both funds have roughly half their assets in their top 10 holdings.
The concentrated approach of Invesco’s PJP appears to be working well. The fund has returned 17.3%, 9.1%, and 7.5% over the 3-year, 5-year, and 10-year time frames.
VHT beats PJP in the 1-year look-back with 10.3% annualized returns, but it trails PJP notably in the 3- and 5-year time frames, with returns of 8.6% and 5.4%, respectively.
So which fund is the better buy? The Vanguard fund’s rock-bottom expense ratio is a strong trait in its favor, but it is hard to ignore the consistent outperformance of PJP over the past five years and year-to-date. The better buy for 2026 for healthcare exposure is PJP.
For more guidance on ETF investing, check out the full guide at this link.
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Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Abbott Laboratories, and Eli Lilly. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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