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4 Healthcare Mutual Funds to Act as a Hedge Against Volatility
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The Federal Reserve on Wednesday increased key interest rates by a quarter of a percentage point to meet its obligation against its inflation expectation of 2% in the long run. The Consumer Price Index (CPI) rose 0.4% in February. However, higher interest rates imposed by the Fed in order to squeeze liquidity from the financial system have wreaked havoc on many banks. The collapse of Silicon Valley Bank and Signature Bank is the biggest failure of U.S. banks since the financial crisis in 2008. The Dow and the S&P 500 have posted a negative return of 3.16%, and 1.59%, respectively, over the past month.
The healthcare sector is one of the most desirable avenues for parking investments when markets are headed south. The demand for such services usually remains unchanged even during an economic downturn and investments in the sector provide sufficient protection to the capital invested. Several pharmaceutical companies also provide regular dividends, which can help mitigate losses from falling share prices. Healthcare mutual funds provide the perfect avenue for investors looking to invest in this sector.
Global spending in the healthcare sector was about $8 trillion at the end of 2022, of which almost half is accounted for by the United States. Healthcare spending in the United States is projected to reach $6.2 trillion by 2028, accounting for 20% of its GDP according to the National Health Care estimates. The healthcare sector continues to offer investors valuable long-term opportunities.
Hence, investors who wish to diversify their portfolio and preserve capital in a volatile market can invest in healthcare mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without any commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have selected four healthcare mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Health Care Services Portfolio (FSHCX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the ownership or management of hospitals, nursing homes, health maintenance organizations, and other companies specializing in the delivery of health care services, FSHCX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
Justin Segalini has been the lead manager of FSHCX since Jan 28, 2016. Most of the fund’s holdings were in companies like UnitedHealth Group (24.21%), Cigna (8.59%) and Humana (7.83%) as of Nov 30, 2022.
FSHCX’s 3-year and 5-year annualized returns are 14.5% and 11.9%, respectively. Its net expense ratio is 0.71% compared to the category average of 1.03%. FSHCX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Putnam Global Health Care Fund (PCHSX - Free Report) invests most of its net assets in large and mid-cap companies worldwide in the healthcare industries. PCHSX advisors prefer to invests in common stocks of companies that are growth or value stocks or sometimes both and have favorable investment potential.
Michael Maguire has been the lead manager of PCHSX since Nov 16, 2016. Most of the fund’s holdings were in companies like UnitedHealth Group (9.38%), AstraZeneca PLC (6.56%) and Merck (6.56%) as of Nov 30, 2022.
PCHSX’s 3-year and 5-year annualized returns are 10.1% and 8.9%, respectively. Its net expense ratio is 0.80% compared to the category average of 1.03%. PCHSX has a Zacks Mutual Fund Rank #2.
Schwab Health Care Fund (SWHFX - Free Report) invests most of its net assets in equity securities issued by companies in the healthcare sector. SWHFX advisors typically invest in companies like pharmaceutical, biotechnology companies, healthcare facilities operations, medical product manufacturers and suppliers, medical providers, and medical services firms.
Wei Li has been the lead manager of SWHFX since Jun 14, 2013, and most of the fund’s holdings were in companies like UnitedHealth Group (6.78%), Johnson & Johnson (5.08%) and Merck (4.76%) as of Oct 31, 2022.
SWHFX’s 3-year and 5-year annualized returns are 11.0% and 8.6%, respectively. Its net expense ratio is 0.80% compared to the category average of 1.03%. SWHFX has a Zacks Mutual Fund Rank #2.
Vanguard Health Care Fund (VGHCX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are engaged in the development, production, or distribution of products and services related to the health care industry including pharmaceutical firms, medical supply companies and businesses that operate hospitals and other health care facilities. VGHCX advisors may also invest in companies that are engaged in medical, diagnostic, biochemical, and other research and development activities.
Jean M Hynes has been the lead manager of VGHCX since May 29, 2008, and most of the fund’s holdings were in companies like UnitedHealth Group (7.30%), Eli Lilly (6.33%), and Pfizer (5.02%) as of Oct 31, 2022.
VGHCX’s 3-year and 5-year annualized returns are 9.4% and 8.6%, respectively. Its net expense ratio is 0.25% compared to the category average of 1.03%. VGHCX has a Zacks Mutual Fund Rank #1.
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4 Healthcare Mutual Funds to Act as a Hedge Against Volatility
The Federal Reserve on Wednesday increased key interest rates by a quarter of a percentage point to meet its obligation against its inflation expectation of 2% in the long run. The Consumer Price Index (CPI) rose 0.4% in February. However, higher interest rates imposed by the Fed in order to squeeze liquidity from the financial system have wreaked havoc on many banks. The collapse of Silicon Valley Bank and Signature Bank is the biggest failure of U.S. banks since the financial crisis in 2008. The Dow and the S&P 500 have posted a negative return of 3.16%, and 1.59%, respectively, over the past month.
The healthcare sector is one of the most desirable avenues for parking investments when markets are headed south. The demand for such services usually remains unchanged even during an economic downturn and investments in the sector provide sufficient protection to the capital invested. Several pharmaceutical companies also provide regular dividends, which can help mitigate losses from falling share prices. Healthcare mutual funds provide the perfect avenue for investors looking to invest in this sector.
Global spending in the healthcare sector was about $8 trillion at the end of 2022, of which almost half is accounted for by the United States. Healthcare spending in the United States is projected to reach $6.2 trillion by 2028, accounting for 20% of its GDP according to the National Health Care estimates. The healthcare sector continues to offer investors valuable long-term opportunities.
Hence, investors who wish to diversify their portfolio and preserve capital in a volatile market can invest in healthcare mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without any commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have selected four healthcare mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
Health Care Services Portfolio (FSHCX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the ownership or management of hospitals, nursing homes, health maintenance organizations, and other companies specializing in the delivery of health care services, FSHCX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
Justin Segalini has been the lead manager of FSHCX since Jan 28, 2016. Most of the fund’s holdings were in companies like UnitedHealth Group (24.21%), Cigna (8.59%) and Humana (7.83%) as of Nov 30, 2022.
FSHCX’s 3-year and 5-year annualized returns are 14.5% and 11.9%, respectively. Its net expense ratio is 0.71% compared to the category average of 1.03%. FSHCX has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Putnam Global Health Care Fund (PCHSX - Free Report) invests most of its net assets in large and mid-cap companies worldwide in the healthcare industries. PCHSX advisors prefer to invests in common stocks of companies that are growth or value stocks or sometimes both and have favorable investment potential.
Michael Maguire has been the lead manager of PCHSX since Nov 16, 2016. Most of the fund’s holdings were in companies like UnitedHealth Group (9.38%), AstraZeneca PLC (6.56%) and Merck (6.56%) as of Nov 30, 2022.
PCHSX’s 3-year and 5-year annualized returns are 10.1% and 8.9%, respectively. Its net expense ratio is 0.80% compared to the category average of 1.03%. PCHSX has a Zacks Mutual Fund Rank #2.
Schwab Health Care Fund (SWHFX - Free Report) invests most of its net assets in equity securities issued by companies in the healthcare sector. SWHFX advisors typically invest in companies like pharmaceutical, biotechnology companies, healthcare facilities operations, medical product manufacturers and suppliers, medical providers, and medical services firms.
Wei Li has been the lead manager of SWHFX since Jun 14, 2013, and most of the fund’s holdings were in companies like UnitedHealth Group (6.78%), Johnson & Johnson (5.08%) and Merck (4.76%) as of Oct 31, 2022.
SWHFX’s 3-year and 5-year annualized returns are 11.0% and 8.6%, respectively. Its net expense ratio is 0.80% compared to the category average of 1.03%. SWHFX has a Zacks Mutual Fund Rank #2.
Vanguard Health Care Fund (VGHCX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are engaged in the development, production, or distribution of products and services related to the health care industry including pharmaceutical firms, medical supply companies and businesses that operate hospitals and other health care facilities. VGHCX advisors may also invest in companies that are engaged in medical, diagnostic, biochemical, and other research and development activities.
Jean M Hynes has been the lead manager of VGHCX since May 29, 2008, and most of the fund’s holdings were in companies like UnitedHealth Group (7.30%), Eli Lilly (6.33%), and Pfizer (5.02%) as of Oct 31, 2022.
VGHCX’s 3-year and 5-year annualized returns are 9.4% and 8.6%, respectively. Its net expense ratio is 0.25% compared to the category average of 1.03%. VGHCX has a Zacks Mutual Fund Rank #1.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>