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Should You Invest in the Vanguard Health Care ETF (VHT)?

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The Vanguard Health Care ETF (VHT - Free Report) was launched on 01/26/2004, and is a passively managed exchange traded fund designed to offer broad exposure to the Healthcare - Broad segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $17.22 billion, making it one of the largest ETFs attempting to match the performance of the Healthcare - Broad segment of the equity market. VHT seeks to match the performance of the MSCI US Investable Market Health Care 25/50 Index before fees and expenses.

The MSCI US Investable Market Health Care 25/50 Index is made up of stocks of U.S. companies within the health care sector.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.36%.

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 8.05% of total assets, followed by Johnson & Johnson (JNJ - Free Report) and Abbvie Inc. (ABBV - Free Report) .

Performance and Risk

So far this year, VHT has lost about -0.79%, and is up roughly 7.38% in the last one year (as of 05/11/2023). During this past 52-week period, the fund has traded between $219.51 and $255.96.

The ETF has a beta of 0.73 and standard deviation of 16.49% for the trailing three-year period, making it a medium risk choice in the space. With about 409 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Health Care ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VHT is a great option for investors seeking exposure to the Health Care ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

IShares Global Healthcare ETF (IXJ - Free Report) tracks S&P Global 1200 Healthcare Sector Index and the Health Care Select Sector SPDR ETF (XLV - Free Report) tracks Health Care Select Sector Index. IShares Global Healthcare ETF has $4.36 billion in assets, Health Care Select Sector SPDR ETF has $40.39 billion. IXJ has an expense ratio of 0.40% and XLV charges 0.10%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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