Better Healthcare ETF: iShares Biotechnology-Focused IBB vs. Simplify's Broad PINK

Investors choosing between the Simplify Health Care ETF (NYSEMKT:PINK) and iShares Biotechnology ETF (NASDAQ:IBB) must weigh the Simplify fund's active management and broader healthcare focus against the iShares fund's lower fees and concentrated biotech exposure.

The iShares Biotechnology ETF tracks a market-cap-weighted index of U.S. biotechnology stocks, offering high-conviction exposure to the sector. In contrast, the Simplify fund is an actively managed ETF targeting a wider array of medical innovation while pledging its net profits to the Susan G. Komen foundation.

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-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The iShares fund is slightly more affordable with a 0.44% expense ratio, compared to 0.51% for the Simplify fund. Investors seeking income may prefer the Simplify fund, which provides a higher payout compared to its biotechnology peer.

Performance & risk comparison

What's inside

The Simplify Health Care ETF provides diversified exposure to healthcare sub-sectors like gene therapy and med-tech, with 91% of the fund in healthcare and small tilts toward industrials and consumer cyclicals. The portfolio holds 58 securities, and its largest positions include Lilly Eli + Co (NYSE:LLY) at 9.81%, Humana Inc (NYSE:HUM) at 7.09%, and Arcutis Biotherapeutics (NASDAQ:ARQT) at 6.47%. It was launched in 2021 and utilizes a currency hedge. Simplify Health Care ETF has paid $0.25 per share over the trailing 12 months, which on its recent ~$38.82 share price works out to a 0.6% yield.

The iShares Biotechnology ETF is a pure-play healthcare fund with 100% exposure to the sector, primarily through biotechnology stocks. Its largest positions among its 244 holdings include Gilead Sciences (NASDAQ:GILD) at 8.37%, Vertex Pharmaceuticals (NASDAQ:VRTX) at 7.61%, and Amgen Inc (NASDAQ:AMGN) at 7.31%. It was launched in 2001 and has no specific quirks like hedging. iShares Biotechnology ETF has paid $0.34 per share over the trailing 12 months, which on its recent ~$204.56 share price works out to a 0.2% yield.

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Which looks like the better buy

Healthcare stocks offer plenty of upside potential, given the possibilities for scientific breakthroughs. The iShares Biotechnology ETF (IBB) and the Simplify Health Care ETF (PINK) offer two unique ways to gain that exposure. Deciding which to choose depends on the factors that matter most to you.

PINK is a newer fund that offers a superior dividend yield compared to IBB. Its expense ratio is higher because it is an actively-managed ETF, with a vehicle that donates management fees to the Susan G. Komen Foundation. So your costs are contributing to the fight against breast cancer. It focuses on biotech, medtech, gene therapy, and other fast growing healthcare-related sectors that can deliver new treatments to solve health concerns.

IBB targets biotech companies specifically, and that has contributed to a strong 42.7% one-year return. Its much larger AUM provides better liquidity, and its greater number of holdings offer diversification. That said, its narrow sector focus and heavy weighting toward mega-cap stocks means performance can suffer if these companies experience a downturn.

Robert Izquierdo has positions in Amgen. The Motley Fool has positions in and recommends Amgen, Eli Lilly, Gilead Sciences, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.