Play Defense With Healthcare Amid Market Volatility

The height of the pandemic saw healthcare equities soar, but that doesn’t mean the sector can no longer serve a portfolio with opportunities. Given its stability, healthcare can help shield investors’ portfolios from market volatility due to inflation fears and rising rates.

While in the investment world, healthcare is viewed through a stable, value-oriented lens. That’s not to say that the industry isn’t going to undergo its own transformative changes.

Per a Health Affairs article, healthcare policy will define and shape future trends that could impact the industry in the short- and long-term horizons. In terms of the former, change won’t happen overnight, so investors looking for a volatility hedge can still opt for healthcare exposure.

“Overall, 2023 will not usher in sweeping health care changes, but incremental action could go far to ensure that providers can recover and meet the next set of challenges,” a Health Affairs article said. “Although it’s impossible to know exactly how these policies may play out, the hope is that they help usher in long-overdue improvements that will modernize the sector for greater effectiveness, reliability, equity, and efficiency.”

Get Broad, Equal-Weighted Exposure to Healthcare

To avoid an overconcentration of healthcare in just a few stocks, an equal-weight strategy should be considered to further reduce volatility. As opposed to selecting individual stocks and weighing them in a portfolio manually, another option is the Invesco S&P 500® Equal Weight Health Care ETF (RYH).

RYH provides exposure to the domestic healthcare industry, and is a strong offering with a unique methodology. RHY follows the S&P 500 Health Care Index. However, each sub-industry component is given equal weight. A strategy like this might appeal to investors looking to avoid traditional indexing methodology, which typically distributes holdings based on market cap.

RYH offers broad diversification across a variety of sub-sectors within the healthcare industry. As such, the fund can capture growth opportunities that can reflect the aforementioned trends that are transforming healthcare — the sector coverage includes equipment/supplies, providers/services, and life sciences tools/services, to name a few.

To add to market stability, it primarily focuses on large-cap companies offering value, growth, and a blend. However, the fund also has a growth component with an additional focus on mid-cap equities in the healthcare industry.

For more news, information, and analysis, visit the Portfolio Strategies Channel.