The healthcare sector can be rife with opportunities, but its vastness can be daunting. However, an easier way to get knee-deep in the sector without heavy research is the Invesco S&P 500 Equal Weight Health Care ETF (RYH).
Per its fund description, RYH is designed to track the S&P 500® Equal Weight Health Care Index. Essentially, it equally weights stocks in the healthcare sector of the S&P 500.
As its name explicitly mentions, the fund utilizes this equal weight strategy to provide broad-based sector exposure without risk of over-concentrating in one or a few stocks. The fund has 66 holdings, contributing to the diversification of the sector, which can be subdivided further.
This is where the healthcare sector can easily diverge. Rather than try to grasp the entire sector, market experts suggest only concentrating on a few sub-sectors.
“Rather than trying to learn everything about the healthcare sector, it helps to select a few industries to get started,” a Market Beat article succinctly explained. “It’s better to take smaller bites by selecting one or two industries to familiarize yourself with. The industries and types of stocks vary in volatility and potential for larger gains and losses.”
The fund invests in a variety of companies in terms of market capitalization, offering a mix of mid-cap companies for a bit of growth exposure while also maintaining large cap holdings. This can help to ease market volatility as large cap companies are less susceptible to heavy swings in the market.
“The least volatile healthcare stocks would be the blue chip mega-cap diversified healthcare companies that are dividend aristocrats,” the Market Beat article continued. “These massive companies are diversified in multiple industries and have a history of consistency through bull and bear markets.”
Recession-Proofing a Portfolio
There’s a lot of discussion among the capital markets about a potential recession due to stagnant economic growth as the Federal Reserve looks to tame inflation with rate-hiking measures. Given this, it’s an opportune time to get healthcare exposure given its bulletproof-like veneer during market downturns.
Additionally, the fund comes with a 0.40% expense ratio as well as a quarterly distribution for dividend seekers. As of April 19, the 30-day SEC yield is 0.66%.
“Healthcare is a good sector for investment,” Market Beat explained. “It is one of 11 sectors in the S&P 500 and recession-proof since people need healthcare in strong and weak economies.”
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