FHLC VS XLV
When discussing the world of finance, especially in the healthcare sector, two exchange-traded funds (ETFs) often come to mind: FHLC and XLV. Both offer unique opportunities for investors, but how do they truly compare? This article provides an in-depth comparison of FHLC versus XLV in terms of their sectors, top holdings, capitalization strategy, tracking, and exposure.
FHLC VS XLV: Sectors and Top Holdings
FHLC, also known as the Fidelity MSCI Health Care Index ETF, aims to reflect the performance of the MSCI USA IMI Health Care Index, which is made up of stocks from all sizes within the health care sector. This fund provides exposure to U.S. companies in the healthcare industry, ranging from biotechnology to pharmaceuticals.
On the other hand, XLV, the Health Care Select Sector SPDR Fund, tracks the Health Care Select Sector Index. This ETF focuses on providing investment results that correspond generally to the health care sector of the S&P 500.
In terms of top holdings, FHLC's major allocations tend to be in big pharmaceutical companies, biotechnology firms, and healthcare equipment and services. XLV similarly has significant holdings in large pharmaceuticals and biotech firms but tends to be more concentrated with its top 10 holdings making up a more significant portion of its assets.
FHLC overlap FHLC VS XLV
FHLC VS XLV: Capitalization Strategy
Market capitalization plays a crucial role in determining the weight of the holdings for both these ETFs. FHLC follows a market-cap-weighted approach, meaning companies with higher market capitalization will have a more substantial representation in the index. This strategy can lead to larger, more established companies driving the ETF's performance.
XLV also employs a market-cap-weighted approach, but since it focuses on the S&P 500’s health care sector, it inherently gives more weight to the larger and more established firms within this particular index. Thus, while both ETFs emphasize the giants of the healthcare world, XLV may offer slightly more concentration due to its foundation in the S&P 500.
FHLC VS XLV: Tracking and Exposure
Both ETFs aim to track their respective indices closely. The tracking difference, which represents the disparity between the ETF's performance and its underlying index, has historically been relatively minimal for both funds. Investors can thus expect these ETFs to provide efficient exposure to the U.S. healthcare sector.
In terms of exposure, FHLC offers a broader spectrum of the healthcare industry, encompassing a more diverse set of companies due to its foundation in the MSCI USA IMI Health Care Index. XLV, while also broad in its offerings, is more concentrated in its exposure due to its tie to the S&P 500's health care sector. Thus, for investors looking for a slightly broader range in healthcare, FHLC may be more appealing, while those desiring a more focused approach might lean towards XLV.
Conclusion
The decision between FHLC and XLV comes down to the specific nuances an investor values. If one is looking for a broader spectrum of the healthcare industry with a diverse set of companies, FHLC stands out. However, for those desiring a more concentrated exposure linked directly to the behemoths of the S&P 500's health care sector, XLV is a worthy contender.
It's also worth noting that past performance is never indicative of future results. Therefore, investors should always do their due diligence and perhaps consult with a financial advisor before making any investment decisions.
Sources:
- Fidelity Investments. ""Fidelity MSCI Health Care Index ETF (FHLC)."" Fidelity.com.
- SPDR Series Trust. ""Health Care Select Sector SPDR Fund (XLV)."" SSGA.com.
- Morningstar. ""Comparative Analysis: FHLC vs. XLV."" Morningstar.com.
- ETF Database. ""ETF Performance Metrics: Tracking and Exposure."" ETFdb.com."
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