Investing in Hospitals – Healthcare Mutual Funds and ETFs
It’s often said that in a world where unemployment runs rampant, having a job in the healthcare industry is about as secure as one can get. So how does investing in hospitals and the healthcare sector fare on Wall Street? The healthcare sector itself is vast and is made up of everything from health insurance providers to pharmaceutical companies. With such a variety of companies in which to invest, knowing the trends can greatly help any investor looking to diversify. Trends to look for include the age of the population, particularly baby boomers, diabetes and obesity epidemics, people living longer, fuller lives with chronic diseases, technology advances, personalized medicine, and the global reach of diseases. Negative trends that would keep investors away from the healthcare sector include a single-payer healthcare system such as Medicare and any United States government-sponsored healthcare program, an uninsured population, consumerism, and cost controls.
Investors interested in pharmaceuticals should know the difference between pharmaceutical and biotech companies. Pharmaceutical companies create smaller compounds while biotech companies deal with larger protein compounds. Both types spend vast amounts of money on research and development endeavors in order to create a drug and have it go from development to FDA clinical trials.
With everything from the creation of pills to advanced healthcare technologies and everything in between, the healthcare sector is vast which makes it confusing to beginning investors. A great place to start is to look into ETFs or healthcare mutual funds that will reduce the risk associated with holding individual stocks. ETFs are exchange-traded funds that are essentially securities that track a commodity or index. ETFs act like any index fund but are traded like products on the stock exchange. Purchasing an ETF gets an investor the diversification needed in any portfolio.
Similarly, healthcare mutual funds allow investors to diversify while having the added bonus of giving the investor access to equities, professionally managed bonds, and other securities. This is an investment that is created from a pool of collected funds and is operated by professional managers, so mutual funds are great alternatives for novice investors. Medical technology is constantly improving and science is paving the way for the creation of all sorts of artificial organs and more effective pharmaceuticals. As with any investment, the healthcare sector does come with some risk, but ultimately this is one service that everyone will need access to on a regular basis, making it an attractive opportunity for investors.