Which Healthcare ETF Is Best for the Long Term: State Street’s XPH or Invesco’s PBE?
Key PointsState Street SPDR S&P Pharmaceuticals ETF provides a more diversified and lower-cost entry to the healthcare sector than its Invesco counterpart.
When considering long-term healthcare investments, investors face a choice between State Street's SPDR S&P Pharmaceuticals ETF (XPH) and Invesco's Biotechnology & Genome ETF (PBE). XPH offers broader exposure to the pharmaceutical industry at a lower cost, while PBE provides a concentrated portfolio focused on biotech and genome-related companies with a higher dividend yield.
XPH boasts a lower expense ratio of 0.35% compared to PBE's 0.59%, making it the more affordable option. It tracks the S&P 500 pharmaceutical industry, holding 61 stocks across various market capitalizations. Key holdings include Xeris Biopharma Holdings, Veradermics, and Septerna. Launched in 2006, XPH has paid $0.27 per share in dividends over the past year, resulting in a 0.4% yield.
On the other hand, PBE offers a more concentrated portfolio of 31 holdings within the biotech and genomics sectors, tracking the Dynamic Biotech & Genome Intellidex Index. Top holdings include Gilead Sciences, Biogen, and Royalty Pharma. Established in 2005, PBE has paid $1.33 per share in dividends over the trailing 12 months, yielding 1.3%.
For most long-term investors, XPH's broad lineup and lower cost make it the easier fund to hold. Its diversification across numerous pharmaceutical companies helps mitigate risks associated with individual company performance or trial failures. While PBE provides a higher dividend yield, its concentrated focus on momentum-driven biotech stocks could be vulnerable if the biotech rally cools.
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