Are you interested in the health care industry and new to the investment possibilities found in health care related exchange traded funds (ETFs)? Let’s take a look at the basics in investing in this segment of the marketplace.

The Senate passed a sweeping health care bill on Christmas Eve, bringing it up to speed with the House. Tens of millions of American who don’t have insurance right now could potentially be receiving it if the Senate and the House can meet in the middle. If this happens, ETFs could present an investment opportunity in this sector. [ETFs hurt by the health care bill.]

The impending legislation isn’t the only reason to consider the sector, though. In choosing health care ETFs, you’d be investing in the performance of an industry subsector, according to Financial Web. [Stocks, ETFs pushed higher by health care sector.]

The health care industry is a fast-growing global industry, with health care facilities popping up all over. The industry is constantly expanding as more people frequent hospitals in need of medical care. Technological advancements, new methods of treatment, new drugs and the rising price of health care are all integral factors that have kept the industry growing.

Before ETFs, investors would have to single-stock pick, hunting for individual companies that could either be a hit or a miss. With hundreds of health care sector stocks out there, that’s a daunting proposition. With ETFs, you can invest in dozens of companies at once and have diversified allocation across an industry. A potential investor may choose an overall sector ETF or a subsector of the health care industry. [Why ETFs suit biotechnology.]

ETFs are liquid assets that can be traded like stocks – an investor may sell them short, buy long, buy an options contract, and so on. Combined with a buying and selling discipline, ETFs can expand your horizons and broaden your portfolio’s exposure. [How to follow trends.]

For more information on the health care sector, visit our health care category.

• iShares Dow Jones U.S. Health Care Sector (NYSEArca: IYH): up 22.1% year-to-date

• Vanguard Health Care (NYSEArca: VHT): up 19.7% year-to-date

• Health Care Select Sector (NYSEArca: XLV): up 20.3% year-to-date

Max Chen contributed to this article.

Tags: ETF 101, Health Care, IYH, Sector ETFs, VHT, XLV