What Is a Healthcare ETF? Everything You Need to Know

What Is a Healthcare ETF? Everything You Need to Know

Learn about healthcare ETFs, including the various types and examples of the top funds.

Research Lead
Reviewed by: etf.com Staff
Edited by: etf.com Staff



Investing in a healthcare ETF can be an effective way for investors to gain exposure to the healthcare industry without having to purchase individual healthcare stocks. This can help to reduce risk and provide diversification across different subsectors of the healthcare industry. 

What Is a Healthcare ETF? 

A healthcare ETF is an exchange-traded fund that invests in a diversified portfolio of healthcare companies, such as pharmaceutical, biotechnology, medical devices and healthcare service providers. The objective of a healthcare ETF is to provide exposure to the healthcare industry's performance and offer investors a way to invest in a diversified basket of healthcare stocks. 

There are a range of reasons investors choose healthcare ETFs, including diversification, defensive investing and potential for long-term growth through continuous innovation, such as new drug development and genomics.

Types of Healthcare ETFs With Examples 

Here are the most common types of healthcare ETFs with examples of top funds: 

Benefits and Risks of Investing in Healthcare ETFs 

Investing in healthcare ETFs can provide several benefits, but it also involves risks. Here are some potential benefits and risks to consider: 

Benefits of Investing in Healthcare ETFs 

  • Diversification: Healthcare ETFs invest in a diversified portfolio of healthcare companies, which can help reduce the risk associated with investing in individual healthcare stocks. 
  • Exposure to a growing industry: The healthcare industry is expected to grow significantly in the coming years, driven by an aging population and increasing demand for healthcare services. Investing in healthcare ETFs can provide exposure to this growth potential. 
  • Access to different subsectors: Healthcare ETFs typically invest in various subsectors of the healthcare industry, such as pharmaceuticals, biotechnology, medical devices and healthcare services. This provides investors with exposure to different segments of the industry. 
  • Lower fees: Healthcare ETFs typically have lower fees compared to actively managed healthcare funds, making them a more cost-effective way to invest in the healthcare industry. 

Risks of Investing in Healthcare ETFs 

  • Market risk: Like any other investment, healthcare ETFs are subject to market risk, which means that their value can fluctuate depending on market conditions. 
  • Concentration risk: Some healthcare ETFs may have a higher concentration of holdings in certain subsectors or companies, which can increase their exposure to risks associated with those subsectors or companies. 
  • Regulatory risk: The healthcare industry is heavily regulated, and changes in regulations can have a significant impact on healthcare companies and their stock prices. Therefore, this regulatory risk can also affect the price of healthcare ETFs. 
  • Company-specific risk: Even though healthcare ETFs provide diversification, they can still be exposed to company-specific risks, such as product recalls, litigation or regulatory issues. 

Bottom Line on Investing in Healthcare ETFs 

Healthcare ETFs can provide a combination of diversification and long-term growth potential. However, it's important to understand the benefits and risks of investing in healthcare ETFs, and it’s important for investors to consider their investment objectives, risk tolerance and investment time horizon before making any investment decisions to buy shares of these funds.

Kent Thune is Research Lead for etf.com, focusing on educational content, thought leadership, content management and search engine optimization. Before joining etf.com, he wrote for numerous investment websites, including Seeking Alpha and Kiplinger. 


Kent holds a Master of Business Administration (MBA) degree and is a practicing Certified Financial Planner (CFP®) with 25 years of experience managing investments, guiding clients through some of the worst economic and market environments in U.S. history. He has also served as an adjunct professor, teaching classes for The College of Charleston and Trident Technical College on the topics of retirement planning, business finance, and entrepreneurship. 


Kent founded a registered investment advisory firm in 2006 and is based in Hilton Head Island, SC, where he lives with his wife and two sons. Outside of work, Kent enjoys spending time with his family, playing guitar, and working on his philosophy book, which he plans to publish in the coming year.