FHLC vs. PJP: Which Healthcare ETF Is the Better Buy for Investors?

Investors must carefully evaluate the similarities and differences between the Fidelity MSCI Health Care Index ETF (FHLC) and the Invesco Pharmaceuticals ETF (PJP) when considering which healthcare-focused exchange-traded fund (ETF) to include in their long-term portfolios. Both funds have a strong focus on the medical sector, but their strategies, costs, and risk profiles vary significantly. Key factors to consider include the funds' beta, one-year returns, dividend yields, and expense ratios.

FHLC is a more cost-effective option, with a lower expense ratio and a higher dividend yield than PJP. This could make it an attractive choice for investors prioritizing costs or income. FHLC provides exposure to over 300 U.S. healthcare stocks, including sizable holdings in Eli Lilly, Johnson & Johnson, and AbbVie. It was established in 2013 and has paid $1.02 per share in dividends over the past year.

In contrast, PJP adopts a more concentrated strategy, focusing exclusively on pharmaceutical companies with a smaller selection of 33 securities. Its main holdings consist of Abbott Laboratories, Amgen, and AbbVie. PJP was launched in 2005 and has also paid $1.06 per share in dividends over the past year. While PJP has outperformed FHLC in both one- and five-year total returns, its reduced diversification introduces higher risk.

FHLC, on the other hand, holds a broader range of healthcare stocks, offering greater protection against volatility in the pharmaceutical subsector.

When deciding between the two ETFs, investors should consider their individual goals. FHLC, with its lower fees and broader diversification, may be the better choice for those seeking cost savings and risk protection. Conversely, PJP's higher returns and more targeted approach could be advantageous for investors aiming to fill specific gaps in their portfolio.

It is important to note that while PJP has been identified as one of the 10 best stock picks by Motley Fool Stock Advisor, FHLC is not included in their list. Investors should weigh these factors and consider additional resources, such as the full guide on ETF investing, when making their decision.