Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect health-care companies to thrive as our population ages, the iShares DJ US Health Care Providers ETF (NYS: IHF) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.47%.
This ETF has performed rather well, beating the S&P 500 over the past three and five years, on average. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 13%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. Quest Diagnostics (NYS: DGX) gained about 9%, partly on news that its CEO would be retiring. The company recently swallowed Celera and Athena, which cost it $1.4 billion. Along with Incyte (NAS: INCY) and some other firms, Quest holds valuable patents on human genes -- but those patents are being reconsidered and may be disallowed.
Other companies didn't add as much to the ETF's returns last year, but could have an effect in the years to come. HCA Holdings (NYS: HCA) shed about 25% since March, and like other hospital operators, stands to suffer if Medicare is pared back. It did get a boost in September, though, announcing plans to buy back $1.5 billion of its shares from Bank of America (NYS: BAC) , one of its underwriters.
The big picture
Demand for health-care services isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
At the time thisarticle was published LongtimeFool contributorSelena Maranjianholds no position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Bank of America.Motley Fool newsletter serviceshave recommended buying shares of Quest Diagnostics. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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