Just because the economic effects of Covid-19 are easing, it doesn’t mean investors should shun healthcare stocks. In fact, now could be a better time than ever as big tech takes a breather amid inflation fears.
Health care has proven to be a stable sector during a market storm. Unless there’s a miracle drug that makes humans immune to any and all ailments, the health care sector will always be around.
“The healthcare sector is a good defensive investment as several investors believe consumers will have to purchase healthcare products even during tough and uncertain times,” a Zacks article, published on Nasdaq, said. “Its non-cyclical nature provides defensive coverage to the portfolio amid market turbulence.”
The S&P 500 is down 8% for the year as inflation fears have taken hold of the markets. The big tech-dominated Nasdaq 100 is faring worse—down 15% for the year.
Compare both of those to the S&P 500 Health Care index and health care is faring much better. The index is down under 2%.
^SPX data by YCharts
Adding an Equal Weight Component
Another way to help ease market volatility is by going with an equal weight strategy. It essentially helps investors avoid putting all their eggs in one basket, avoiding over-concentration in a portfolio.
That said, investors can give one exchange-traded fund (ETF) consideration: the Invesco S&P 500 Equal Weight Health Care ETF (RYH). It combines the stability of the health care sector with even more volatility support with the use of an equal weight strategy.
RYH seeks to track the investment results of the S&P 500® Equal Weight Health Care Index. The underlying index is composed of all of the components of the S&P 500® Health Care Index, which is an index that contains the common stocks of all companies included in the S&P 500® Index that are classified as members of the healthcare sector.
The fund is also outpacing the broad market S&P 500. It’s up almost 12% within the last 12 months versus the S&P’s gain of 6.5%.
RYH data by YCharts
For more news, information, and strategy, visit the Innovative ETFs Channel.
