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

Zacks Equity Research
·3-min read

Designed to provide broad exposure to the Healthcare - Broad segment of the equity market, the Vanguard Health Care ETF (VHT) is a passively managed exchange traded fund launched on 01/26/2004.

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.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Broad 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 Vanguard. It has amassed assets over $16.27 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.

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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

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 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.29%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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, Johnson & Johnson (JNJ) accounts for about 7.77% of total assets, followed by Unitedhealth Group Inc. (UNH) and Pfizer Inc. (PFE).

Performance and Risk

The ETF has lost about -7.85% so far this year and is up about 1.72% in the last one year (as of 04/27/2022). In that past 52-week period, it has traded between $234.35 and $267.51.

The ETF has a beta of 0.82 and standard deviation of 21.24% for the trailing three-year period, making it a medium risk choice in the space. With about 443 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) tracks S&P Global 1200 Healthcare Sector Index and the Health Care Select Sector SPDR ETF (XLV) tracks Health Care Select Sector Index. IShares Global Healthcare ETF has $3.48 billion in assets, Health Care Select Sector SPDR ETF has $37.25 billion. IXJ has an expense ratio of 0.43% 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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Vanguard Health Care ETF (VHT): ETF Research Reports
 
UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report
 
Johnson & Johnson (JNJ) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
 
iShares Global Healthcare ETF (IXJ): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research