FHLC VS VHT
The investment landscape has dramatically evolved over the years, and as the medical and healthcare sectors continue to grow, so too does the interest of investors in them. Two of the most significant ETFs that focus on this sector are the Fidelity MSCI Health Care Index ETF (FHLC) and the Vanguard Health Care ETF (VHT). Both have their unique strengths, but which one stands out the most? Here, we'll be diving deep into the world of FHLC VS VHT, comparing them on various fronts to help you make an informed decision.
FHLC VS VHT
The healthcare sector, being one of the largest sectors in the S&P 500, is widely recognized for its stability and growth potential. Both FHLC and VHT target this sector, but they differ in their approach and coverage. FHLC tracks the MSCI USA IMI Health Care Index and has over 400 holdings. This ETF provides exposure to companies in the pharmaceuticals, biotechnology, and life sciences tools & services sectors.
On the other hand, VHT follows the MSCI US Investable Market Health Care 25/50 Index. It has a more concentrated portfolio, with around 430 holdings. VHT also includes stocks from pharmaceuticals, biotech, healthcare equipment, and services.
FHLC VS VHT
Peeling back the layers reveals the constituents of these ETFs. FHLC has a significant concentration in Pharmaceuticals, Biotechnology, and Life Sciences Tools & Services. Its top holdings include household names like Johnson & Johnson, Pfizer, and Merck.
Conversely, VHT leans heavily towards Pharmaceuticals, Healthcare Equipment & Supplies, and Healthcare Providers & Services. Its top holdings are similar to FHLC with Johnson & Johnson, UnitedHealth Group, and Pfizer gracing the list.
FHLC overlap FHLC VS VHT
FHLC VS VHT: Capitalization strategy
Capitalization strategy is an essential aspect to consider, as it reflects the investment strategy's risk and return profile. FHLC is a market-cap-weighted fund, meaning the stocks with the largest market capitalization have the most significant weighting.
VHT also follows a market-cap-weighted approach, but due to its slightly different index, the weightage of individual stocks can vary compared to FHLC. This makes VHT somewhat more concentrated towards its top holdings than FHLC, which might result in more pronounced reactions to market movements by those companies.
FHLC VS VHT: Tracking and Exposure
Tracking error and exposure are crucial metrics for ETF investors. In the face-off between FHLC VS VHT, both funds exhibit a low tracking error, which means they closely mimic the performance of their underlying indices.
However, the exposure each ETF provides can vary slightly. While both funds provide ample exposure to the healthcare sector, FHLC has a broader exposure due to its larger number of holdings, offering diversification across various healthcare sub-sectors. In contrast, VHT gives investors a more focused approach with its somewhat concentrated portfolio.
Conclusion
Choosing between FHLC and VHT is not a straightforward task. Both ETFs offer robust exposure to the healthcare sector, have solid track records, and low fees. Your decision should be based on your investment goals, risk tolerance, and the kind of exposure you seek.
If you prefer a broader exposure with a more diversified approach across the healthcare industry, FHLC might be the right choice. However, if you're looking for a slightly more focused exposure and don't mind the concentration towards top holdings, VHT could be the way to go. As always, before making any investment, it's essential to conduct thorough research and consult with a financial advisor.
Sources:
- Fidelity Investments. Fidelity MSCI Health Care Index ETF (FHLC).
- Vanguard Group. Vanguard Health Care ETF (VHT).
- MSCI. MSCI USA IMI Health Care Index.
- S&P 500. Healthcare Sector Overview.
FHLC ETF issuer
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