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Fidelity MSCI Health Care Index ETF (NYSEMKT:FHLC) provides broad, low-cost exposure to the healthcare sector, whereas iShares Biotechnology ETF (NASDAQ:IBB) offers a concentrated yet more expensive focus on biotechnology companies.
Biotechnology often acts as a high-beta growth engine within the healthcare space, but it carries distinct volatility risks. iShares Biotechnology ETF tracks this specific segment, while Fidelity MSCI Health Care Index ETF casts a wider net across pharmaceutical and healthcare equipment companies. This comparison explores how their differing scopes influence long-term risk and return.
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.
Fidelity MSCI Health Care Index ETF is significantly more affordable with an expense ratio of 0.08%, compared to 0.44% for iShares Biotechnology ETF. While iShares Biotechnology ETF commands higher assets under management (AUM), the Fidelity fund provides a higher dividend yield for income-oriented investors.
Fidelity MSCI Health Care Index ETF seeks to track a broad index representing the investable universe of healthcare companies. Its portfolio of 365 holdings spans the entire sector, with Healthcare representing 99% of the fund. Its largest positions include Eli Lilly & Co (NYSE:LLY) at 13.15%, Johnson & Johnson (NYSE:JNJ) at 8.67%, and Abbvie (NYSE:ABBV) at 6.76%. It was launched in 2013. Fidelity MSCI Health Care Index ETF has paid $1.02 per share over the trailing 12 months, which, on its recent ~$82.5 share price, works out to a 1.2% yield.
iShares Biotechnology ETF tracks an index of publicly traded U.S. biotechnology companies, making it more sensitive to that specific industry. Biotechnology accounts for 87% of the fund, with Life Sciences Tools & Services at 9% and Pharmaceuticals at 3% making up the remainder. Among its 243 holdings, the top positions include Gilead Sciences (NASDAQ:GILD) at 8.36%, Amgen (NASDAQ:AMGN) at 7.81%, and Vertex Pharmaceuticals (NASDAQ:VRTX) at 7.58%. It was launched in 2001. iShares Biotechnology ETF has paid $0.34 per share over the trailing 12 months, which, on its recent ~$206.5 share price, works out to a 0.2% yield.
For more guidance on ETF investing, check out the full guide at this link.
While IBB has been the better-performing ETF over the last year, its total returns have only tripled, compared to FHLC's quadrupling since 2013. These outsize returns would have me leaning toward FHLC, but I think choosing between the two comes down to an investor's needs and preferences more than anything.
IBB is solely focused on biotechs, whereas FHLC is a broader bet on the biggest names in healthcare. If you can't stomach the biotech industry's swings, IBB likely isn't a good fit for you.
That said, nearly 30% of FHLC's portfolio consists of Eli Lilly, Johnson & Johnson, and AbbVie, so you want to be comfortable holding those positions before buying the ETF.
Ultimately, I would personally choose FHLC for its lower cost, stronger historical returns, higher dividend yield, lower volatility, and broader healthcare exposure. However, if you believe the biotech industry is set to boom in an AI-powered age, IBB is a great option for that specific niche.
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Josh Kohn-Lindquist 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.
Better Buy: Fidelity Health Care ETF (FHLC) or iShares Biotechnology ETF (IBB)? was originally published by The Motley Fool
