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The Fidelity MSCI Health Care Index ETF (NYSEMKT:FHLC) provides broad healthcare exposure at a lower cost, while the Invesco Biotechnology & Genome ETF (NYSEMKT:PBE) targets a concentrated, high-growth niche.
Investors seeking exposure to medical innovation often choose between broad sector funds and niche industry plays. This comparison of the Fidelity MSCI Health Care Index ETF and the Invesco Biotechnology & Genome ETF illustrates this choice, balancing different levels of concentration, cost, and historical volatility in the search for capital appreciation.
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.
The Fidelity MSCI Health Care Index ETF is more affordable, carrying an expense ratio of 0.08% compared to the 0.59% charged by the Invesco Biotechnology & Genome ETF. The Invesco fund offers a slightly higher yield payout for income-seeking investors.
The Fidelity MSCI Health Care Index ETF tracks 365 holdings across the broader healthcare landscape, with a 99% allocation to healthcare and a 1% tilt toward technology. Its largest positions include Eli Lilly & Co (NYSE:LLY) at 12.94%, Johnson & Johnson (NYSE:JNJ) at 8.72%, and Abbvie (NYSE:ABBV) at 6.57%. This broad diversification results in a fund that encompasses pharmaceuticals, equipment, and services providers. Launched in 2013, the Fidelity fund has paid $1.02 per share over the trailing 12 months, which on its recent ~$81.29 share price works out to a 1.2% yield. Its assets under management (AUM) sit at $3.5 billion.
The Invesco Biotechnology & Genome ETF is a concentrated portfolio of 31 U.S.-based companies, focusing entirely on healthcare with 100% sector weight. It seeks to replicate the Dynamic Biotech & Genome Intellidex Index, where top holdings include Natera (NASDAQ:NTRA) at 6.31%, Illumina (NASDAQ:ILMN) at 6.29%, and Biogen (NASDAQ:BIIB) at 5.16%. This tighter focus on genetic engineering and biotech research introduces more specific industry risk compared to its broader counterpart. Launched in 2005, the Invesco fund has paid $1.33 per share over the trailing 12 months, which on its recent ~$97.04 share price works out to a 1.4% yield. It manages $0.4 billion in assets under management (AUM).
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The healthcare sector is generating more investment headlines than it has in years, driven by record dealmaking, GLP-1 drug innovation, and a wave of biotech acquisitions that shows no sign of slowing. That activity benefits both of these ETFs, but from very different angles.
FHLC takes a seat at every table in healthcare, owning nearly 400 companies from pharmaceutical giants to medical device makers and health insurers, all tracked passively at rock-bottom cost. PBE has a much narrower focus, selecting around 30 biotechnology and genomics companies through a factor-based screen that evaluates momentum, earnings quality, and value. That active-leaning character distinguishes PBE from simple passive biotech trackers and has delivered competitive returns in strong biotech environments.
Of note, PBE charges more than seven times what FHLC does, a fee that demands consistent outperformance just to break even against the cheaper alternative. For most long-term investors, FHLC's broader diversification, income potential, and dramatically lower cost make it the more dependable foundation. PBE rewards those with specific conviction in biotechnology and genomics innovation who are prepared to pay for a concentrated, factor-driven approach.
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Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Eli Lilly, Illumina, and Natera. The Motley Fool recommends Biogen and Johnson & Johnson. The Motley Fool has a disclosure policy.
Which Healthcare ETF Is the Better Buy: Fidelity's Broad FHLC or Invesco's Biotech-Focused PBE? was originally published by The Motley Fool
