Healthcare is one of the most promising sectors as its defensive characteristics attract investors during market gyrations. And with its scope, evolution and advancement, the sector offers consistent returns, which are boosted by healthcare’s diverse portfolio. Technological advancement is helping diagnose rare illnesses and treat chronic diseases. With an expanding aging population, the healthcare space is growing much faster than the economy itself.

So far this year, the Health Care Select Sector SPDR Fund (XLV) has edged up 10%, compared with the S&P 500’s rise of 12.5%. In the first-quarter of 2021, witnessed a 24.9% growth in earnings and 10.2% growth in revenue. It is also one of the nine Zacks sectors that is expected to earn more in the second-quarter of 2021, compared to its pre-Covid 2019 Q2 period, earnings are expected to rise 20.9%.

According to a research by Deloitte, it is anticipated that non-communicable diseases will continue to rise even after the pandemic and are projected to account for 75% of all deaths in 2030, up from 63% in 2013.

The pandemic has dented regular cash flow for the healthcare industry due to social-distancing norms and a significant drop in medical tourism. While traditional offices, emergency rooms and hospitals were off limits, people started using telehealth services, both video and telephonic, increasingly. Telehealth services are convenient for doctors/providers and patients, especially in remote areas. In fact, its outreach and effectiveness will help in expanding its usage in the future.

Coming to the aging population, it is believed that healthcare expenditures for individuals above the age of 65 is five times more than the spending on a child’s healthcare and almost three times of that for the 40-60 age group. The impact of the older cohort is obvious and pharmaceuticals, biotech, technical equipment, and facilities from nursing homes to surgery centers, have a huge scope in the years to come.

3 Top Healthcare Picks

Healthcare companies are often considered evergreen and were in the limelight even before the virus outbreak. While rapid mutation and fast spreading abilities of coronavirus intrigue researchers, healthcare companies are trying their best to put an end to this global health scare.

But, as said above, the space has ample scope to keep growing post pandemic as well. Hence, we have handpicked three healthcare mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) that are poised to grow. Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform peers in the future.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Health Care Portfolio (FSPHX Quick QuoteFSPHX - Free Report) fund aims for capital appreciation. This non-diversified fund invests majority of assets in common stocks of companies principally engaged in the design, manufacture or sale of products or services used for or in connection with health care or medicine.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, FSPHX has returned 18% and 16.9% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSPHX has an annual expense ratio of 0.69% versus the category average of 1.03%.

Fidelity Select Medical Technology and Devices Portfolio (FSMEX Quick QuoteFSMEX - Free Report) fund aims for capital growth. It invests majority of assets in companies that are engaged in activities such as research, manufacturing, supply and sale of medical equipment and related technologies.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, FSMEX has returned 22.4% and 22.2% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSMEX has an annual expense ratio of 0.70%, which is below the category average of 1.03%.

T. Rowe Price Health Sciences Fund (PRHSX Quick QuotePRHSX - Free Report) aims for long-term capital appreciation. This non-diversified fund invests majority of assets in common stocks of large- and mid-capitalization companies mostly engaged in research, production and distribution of products and services in the healthcare-related industry.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, PRHSX has returned 18.5% and nearly 17% over the past three and five-year period, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRHSX has an annual expense ratio of 0.76%, which is below the category average of 1.03%.

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