The healthcare sector has long been considered one of the most reliable defensive sectors, making it a strong way to augment a portfolio during recessionary periods.
U.S. stocks fell on Tuesday ahead of this week’s Federal Reserve policy meeting, in which the Fed is expected to raise rates by 75 basis points. Yields on the benchmark 10-year Treasury note continued to rise on Monday noting their highest close in a decade.
The Invesco S&P 500® Equal Weight Health Care ETF (RYH), which provides exposure to the domestic healthcare industry with a unique methodology, is a strong offering to consider in the current environment. 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 the traditional indexing methodology which typically distributes holdings based on market cap.
RYH is designed to offer more balanced exposure for the long-term investor since it has the added benefit of avoiding the potentially adverse impact of rallies or crashes in a specific sub-industry within healthcare.
The fund has exhibited a tilt toward low-volatility stocks, or companies whose shares have a history of lower standard deviation of returns. Such exposure tends to pay off most during periods of market stress.
Current holdings, which are equally weighted, include Gilead Sciences (GILD), Pfizer Inc. (PFE), Vertex Pharmaceuticals Incorporated (VRTX), Eli Lilly and Company (LLY), Catalent Inc. (CTLT), and Viatris Inc. (VTRS). The fund holds 65 securities as of August 12.
The fund has $910 million in assets under management and charges a 40 basis point expense ratio, offering a cost advantage over many other funds offering similar exposure.
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