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Should You Invest in the iShares U.S. Healthcare Providers ETF (IHF)?

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Designed to provide broad exposure to the Healthcare - Healthcare - Providers segment of the equity market, the iShares U.S. Healthcare Providers ETF (IHF - Free Report) is a passively managed exchange traded fund launched on 05/01/2006.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Healthcare - Providers is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $1.52 billion, making it one of the larger ETFs attempting to match the performance of the Healthcare - Healthcare - Providers segment of the equity market. IHF seeks to match the performance of the Dow Jones U.S. Select HealthCare Providers Index before fees and expenses.

The Dow Jones U.S. Select HealthCare Providers Index is free-float adjusted market capitalization-weighted index. It measures the performance of the health care providers sub-sector of the U.S. equity market. It includes health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes rehabilitation & retirement centres.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.42%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.64%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Unitedhealth Group Inc (UNH - Free Report) accounts for about 23.05% of total assets, followed by Cvs Health Corp (CVS - Free Report) and Anthem Inc (ANTM - Free Report) .

The top 10 holdings account for about 77.09% of total assets under management.

Performance and Risk

The ETF has lost about -11.22% so far this year and is down about -4.80% in the last one year (as of 05/10/2022). In that past 52-week period, it has traded between $251.93 and $295.88.

The ETF has a beta of 0.89 and standard deviation of 26.78% for the trailing three-year period, making it a medium risk choice in the space. With about 73 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Healthcare Providers ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IHF is a good option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.

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