logo

Fees as Low as 0.08%! 7 Top Healthcare Funds and ETFs to Watch in 2026

Shorted-to-the-hilt KalVista rockets 39% as Chiesi swoops in with $1.9bn cash bid
Published on: Jan 28, 2026
Author: Sunlight Xiang

Despite facing near-term financial pressures, the healthcare sector’s growth prospects for 2026 remain optimistic, fueled by demographic tailwinds and therapeutic innovation. For investors looking to gain exposure, mutual funds and ETFs offer efficient tools. Here are seven carefully selected funds spanning core and niche strategies to help target opportunities.

A January 12 report from McKinsey highlights increasing financial strain on the U.S. healthcare system, with aggregate operating margins falling to 8.9% in 2024 from 11.2% in 2019. Payers and providers have borne the initial brunt. Analysts, however, expect the industry’s position to strengthen over the next three years. The long-term drivers are clear: an aging population and new therapies continue to drive underlying demand, making healthcare a compelling component for long-term portfolios.

1. Health Care Select Sector SPDR Fund (XLV) – Low-Cost Core Holding

  • Expense Ratio: 0.08%
  • The Take: This ETF tracks the S&P 500 Healthcare Sector Index, offering a one-stop solution for investing in large, established U.S. healthcare companies. With ultralow fees, transparent holdings (about 60 stocks), and top positions in Eli Lilly, Johnson & Johnson, and AbbVie, it’s suited for a wide range of investors seeking a stable, low-cost core exposure.

2. Vanguard Health Care ETF (VHT) – Broader Ecosystem Exposure

  • Expense Ratio: 0.09%
  • The Take: VHT tracks a broader index than XLV, encompassing approximately 395 large-, mid-, and small-cap companies. This results in a smaller average market cap (around $113 billion) and potentially slightly higher volatility (beta of 0.68 vs. XLV’s 0.59). It provides more comprehensive exposure across the healthcare ecosystem for investors seeking growth across all company sizes.

3. iShares U.S. Medical Devices ETF (IHI) – Steady Growth in Medical Equipment

  • The Take: This ETF offers direct access to the fast-growing U.S. medical devices industry, covering products like surgical robots, diagnostic tools, and implantable devices. IHI tracks the Dow Jones U.S. Select Medical Equipment Index, concentrating on established leaders with stable demand such as Abbott, Stryker, Boston Scientific, and Intuitive Surgical. Unlike biotech firms, device companies benefit from recurring demand driven by hospital upgrades and procedural advancements, offering a relatively stable growth pillar for portfolios.

4. T. Rowe Price Health Sciences Fund (PRHSX) – Active Management for Alpha

  • Expense Ratio: 0.80%
  • The Take: This actively managed mutual fund relies on stock selection and timing in an attempt to outperform the market. It comes with significantly higher fees and typically higher turnover than index funds. It appeals to investors who believe skilled management can add value, though this introduces greater outcome variability and reliance on manager skill. The fund invests across pharmaceuticals, healthcare equipment, and biotechnology.

5. iShares Biotechnology ETF (IBB) – Mainstream Biotech Access

  • Expense Ratio: 0.44%
  • The Take: This ETF targets the biotechnology sector, holding 256 stocks with a bias toward larger, established names. The biotech industry is known for high volatility, with stock prices sensitive to clinical trial results and regulatory news. It is generally not a core holding but can serve as a satellite position for aggressive investors seeking targeted exposure and able to tolerate significant risk.

6. SPDR S&P Biotech ETF (XBI) – High-Beta, Equal-Weight Biotech Play

  • The Take: Designed for aggressive exposure to faster-moving biotech segments, XBI employs an equal-weight strategy. This gives smaller and mid-cap firms greater influence on performance compared to cap-weighted funds like IBB, creating a higher-risk, higher-reward profile with notable volatility. By diversifying across 135 stocks, it allows investors to tap into frontier areas like gene therapy and RNA medicines without picking individual winners.

7. iShares Global Healthcare ETF (IXJ) – Global Diversification

  • Expense Ratio: 0.40%
  • The Take: This ETF provides international diversification by tracking global healthcare companies. While its top holdings overlap with U.S.-focused funds, it includes significant non-U.S. leaders like Roche, Novartis, and AstraZeneca. It helps investors reduce single-country risk and complement domestic healthcare exposure.

Bottom Line

From broad index ETFs with fees as low as 0.08% to targeted thematic funds in medical devices or biotech, investors have multiple tools to position for the healthcare sector’s long-term growth narrative. By aligning choices like steady IHI or volatile XBI with their risk tolerance, investors can build a diversified strategy to navigate current headwinds and potential opportunities through 2026 and beyond.

Biotechnology ETF Funds Medical Device Pharmaceutical

Related Posts