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Healthcare Sector to Gain From New Trends: 4 Fund Picks

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United States’ healthcare sector promises growth ahead, thanks to a considerable rise in national healthcare spending and healthy job growth witnessed in the past few months. Notably, healthcare is one of the few sectors whose products and services witness consistent demand, regardless of economic or geopolitical setbacks.

Therefore healthcare mutual funds could be ideal for investors seeking steady growth and returns ahead.

U.S. Healthcare Spending to Rise Further

U.S. healthcare spending is projected to increase at an average rate of 5.5% on an annualized basis during 2018-2027. Spending related to healthcare is expected to reach about $6.0 trillion by 2027 in the country, per a U.S. Centers for Medicare and Medicaid Services report.

To be precise, crucial economic and demographic factors that are the basis of the healthcare sector are expected to be a major driving force behind its growth during the forecast period. In addition, the cost of health care goods and services is also expected to rise at a rate of 2.5% over 2018-2027. This will give a boost to the companies operating in the sector to a large extent.

Remarkable New Job Additions in Healthcare

The Bureau of Labor Statistics’ latest report indicated that the healthcare sector in the United States ranked second in terms of new job additions in July.

The sector added 30,000 new jobs in July and 405,000 over the past year. In fact, ambulatory health care services single-handedly accounted for about two-thirds of the new employment last month, having added 29,000 new jobs.

Our Choices

Apart from the aforementioned factors, the distinct profit margins of companies operating in the healthcare sector and their steady cash flows promise stability. In addition, the ongoing research and implementation and use of superior medical equipment are also boosting the healthcare sector.

In fact, AI, machine learning and big data have found widespread implementation across technological equipment in healthcare and this is bound to push the sector further.

We have, thus, selected four mutual funds that invest in the healthcare sector. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

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 Services Portfolio (FSHCX - Free Report) fund seeks capital appreciation over a long period. The fund primarily invests in securities of companies that are engaged in the ownership or management of hospitals, nursing homes, health maintenance organizations and other companies that specialize in the delivery of health care services. The fund prefers to invest in common stocks.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSHCX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.23%. The fund has returned 5.3% on a year-to-date basis.

Fidelity Select Medical Technology and Devices Portfolio (FSMEX - Free Report) fund aims for capital growth. The fund invests the majority of its assets in companies that are engaged in research, development, manufacture, distribution, supply or sale of medical equipment and devices and related technologies.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSMEX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 1.23%. The fund has returned 19.7% on a year-to-date basis.

Janus Henderson Global Life Sciences Fund Class A (JFNAX - Free Report) seeks capital appreciation over a long period. The fund invests most of its assets in healthcare-related companies. The fund invests in pharmaceuticals, biotechnology and services or devices in a bid to benefit from the overall healthcare sector.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

JFNAX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.99%, which is below the category average of 1.23%. The fund has returned 15.4% on a year-to-date basis.

Hartford Healthcare HLS Fund Class IA (HIAHX - Free Report) aims for long-term capital growth. The fund invests the majority of its assets in equity securities of companies that operate in the healthcare sector. The fund may invest across companies of any market capitalization and these companies may be located in the United States or abroad.

This Zacks sector – Health product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

HIAHX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.89%, which is below the category average of 1.23%. The fund has returned 15.8% on a year-to-date basis.

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