The diversified healthcare space comprises pharmaceutical, clinical-stage biotech, hospital, healthcare equipment, diagnostics, and health tech, and is generally considered defensive in nature. The pandemic, however, divided the sector into two distinctive segments, one fighting COVID-19 and the other, not. Pharma giants like Moderna soared more than 100% on emergency use authorization of its COVID-19 vaccine, meanwhile several hospitals suffered loss from the lack of typical patients. Per a report commissioned by the California Hospital Association, state hospitals lost more than $8 billion last year while dealing with the pandemic.

Now as the pandemic is easing, clinical specialty centers are reopening and gradually returning to regular business. Also, companies are constantly working on finding a permanent cure from this rapidly mutating virus and other diseases. Additionally, the Biden administration recently offered a $65-billion plan aimed toward combating biological threats like coronavirus after the pandemic dissipates. The government aims to start preparing to deal with any future viral threat so that the economy does not suffer as much as the current pandemic, costing them nearly $16 trillion in lost economic output.

Though many may point out that major pandemics occur at a frequency of every 20 years, it can still cost $800 billion per year, where the county spends around $24.2 billion to develop and test new vaccines, make improvements to vaccine distribution and manufacture at the same time. Hence, the pandemic highlighted the need for the healthcare system to revamp, opening up ample opportunity for the space to grow.

Additionally, the healthcare space will get a significant boost from advancement in technology. Per an Industry Research report, the global pharma and health care market size is projected to reach a worth of $1.58 trillion by 2027, from $1.2 trillion in 2020, at a CAGR of 4%. The report also states that North America is one of the largest consumer, with a market share of nearly 50%.

4 Top Fund Picks

The fact that healthcare companies are often considered evergreen has been proven by the current pandemic. Though several companies suffered losses, others especially those engaged in the virus combat, surged. The need for healthcare will remain even after the pandemic is over and thus has enough space to continue growing.

Given the scenario, we have handpicked four healthcare mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (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, the fund has returned 17.9% and 16.5% 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, a Zacks Mutual Fund Rank #1 fund, 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, the fund has returned 24.9% 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, a Zacks Mutual Fund Rank #1 fund, 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, the fund has returned 19.3% and 17.8% 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, a Zacks Mutual Fund Rank #1 fund, has an annual expense ratio of 0.76%, which is below the category average of 1.03%.

Fidelity Select Biotechnology Portfolio (FBIOX Quick QuoteFBIOX - Free Report) fund aims for capital appreciation. This non-diversified fund invests majority of net assets in common stocks of companies mostly engaged in the research, development and distribution of biotechnological products.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 13% and 13.5% 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.

FBIOX, a Zacks Mutual Fund Rank #2 fund, has an annual expense ratio of 0.70%, which is below the category average of 1.03%.

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