The U.S. health care sector continues to underperform on Wall Street, with the benchmark S&P 500 Health Care Sector Index down 1.5% year to date by market price as of Sept. 26. That’s significantly below the S&P 500’s 13% return. Looking at overall numbers, the diagnosis is also bleak on a global scale, with the MSCI World Health Care Index off by 11.2% over the past 12 months through the end of August. But recently there’s been a slow-moving, upward trajectory.
Health care hasn’t only lagged in 2025. Between 2015 and 2024, health care stocks annually underperformed the broader market with a few exceptions, though historically health care has been a standout sector. The industry has been plagued by rising costs for years, and 2025’s tariff conflicts haven’t helped. Higher levies on everything from surgical tools to diabetes medicine to blood pressure cuffs have inflated sector company costs, at a time when health care companies are tightening their budgets, bracing for more supply chain shortages (a system exposed as a major weakness during the COVID-19 crisis), and experiencing the ripple effects of the Biden and Trump administrations’ court-approved policies allowing Medicare to negotiate prescription drug prices.
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The recently passed One Big Beautiful Bill Act could take a big bite out of health care earnings growth, given the tighter Medicaid mandates and the $5 trillion debt ceiling addition included in the new law. Toss higher tariffs into the mix and it’s becoming clear that the first half of 2025 negatively impacted the U.S. and global health care landscapes.
Despite that, health care exchange-traded funds, or ETFs, and their investors have started to see incremental gains over the past few months, and biotech stocks are rising faster. There is also room for optimism in the health care sector due to the aging demographic in need of health care services and signs that tariff wars are abating in the U.S. and abroad.
Earlier this year, Janus Henderson analyst Luyi Guo said health care stocks were expected to be on the upswing, with industry stocks trading at a discount. “The entry point for long-term investors has rarely been this attractive. Starting from such low valuations, we believe health care stocks are primed for gains when there’s positive news,” Guo noted.
Health care ETFs, which cover key sectors such as biotechnology, pharmaceuticals, research services, home health care, hospitals, long-term-care facilities, and medical equipment and supplies, are also impacted by rising tariffs, high inflation and squeezed government budgets.
In a volatile environment, it may be easier to land a good health care ETF at a lower price, which can set an investor up for robust returns when the smoke clears. Here’s a snapshot of six health care funds with stable vital signs now:
| Fund | Expense ratio | 30-day SEC yield* |
| iShares Global Healthcare ETF (ticker: IXJ) | 0.40% | 1.6% |
| Vanguard Health Care ETF (VHT) | 0.09% | 1.5% |
| Fidelity Select Health Care (FSPHX) | 0.63% | 0.0% |
| Health Care Select Sector SPDR ETF (XLV) | 0.08% | 1.8% |
| Invesco S&P 500 Equal Weight Health Care ETF (RSPH) | 0.40% | 0.8% |
| SPDR S&P Biotech ETF (XBI) | 0.35% | 0.0% |
*As of Sept. 26.
iShares Global Healthcare ETF (IXJ)
This iShares ETF has historically attracted investors seeking international diversification, offering exposure to global health care companies in the U.S., Europe and Asia, in particular. The fund is stocked with industry heavyweights, including Eli Lilly & Co. (LLY), Johnson & Johnson (JNJ) and AbbVie Inc. (ABBV), which currently compose about 20% of the fund.
The fund is up 1.2% year to date, trailing its peers on average. However, when the lens is pulled back, the fund’s five-year performance is 5.5%, well ahead of its category (2.9%). The fund also comes with a solid 1.6% dividend yield, and investors pay a moderately priced expense ratio of 0.4%. Analysts deem IXJ a safe bet for new health care investors because it offers the stability of large-cap stocks with the growth potential typically found in younger, up-and-coming health care stocks.
Vanguard Health Care ETF (VHT)
The Vanguard Health Care ETF is a pure-play health care fund, with the portfolio fully invested in sector companies. It’s lagging right now, as many health care stocks are in sell-off mode. Investors are seeking growth in faster-moving sectors like technology and telecommunications, or stability in cyclical stocks like manufacturing, which tend to pick up steam when the economy grows stronger. This is particularly true as global investors eye the U.S. in the second half of 2025. The fund has also been negatively impacted by UnitedHealth Group Inc.’s (UNH) previous share-price collapse of 45% in recent months.
Those are all “good” reasons why VHT is up less than 1% year to date, but similar to IXJ, the fund does offer a nice 1.5% dividend, which admittedly is a small consolation to investors who’ve seen the fund lose 8.3% of its value over the past year.
Still, the fund holds $17.6 billion in assets, which allows it to better weather the current market storm compared to smaller funds. Toxic markets don’t last forever, and regardless of what happens to the economy and U.S. households, people still need to pay for health care, including preventive treatment and recuperative care. VHT offers an ample array of consumer health care stocks, ranging from drugstore chains to biotech firms that develop treatments for weight loss and mental health. Familiar names like Eli Lilly, UnitedHealth Group, AbbVie, Johnson & Johnson and Abbott Laboratories (ABT), which make up roughly 30% of the fund, provide a measure of stability for beleaguered VHT investors.
Fidelity Select Health Care (FSPHX)
This Fidelity health care fund is flat year to date, roughly in line with its index. Like IXJ and VHT, the fund has been on a significant losing streak lately, shedding 7.1% over the past year as of Sept. 26. They have each recovered some ground over the past 90 days, however.
The fund’s objective is to stick to fundamentals, focusing on health care stocks that target capital appreciation. Its share lineup is just as straightforward, with 80% of its assets invested in health care companies that have a hardy history of products and services in health care or medicine.
Except for 2022, when the fund sank 12.8%, FSPHX has been a reliable producer for fund investors over the past eight years. FSPHX focuses on what investors generally want to see from a sector fund, diversifying its assets globally with heavy allocations to recognizable names in health care and medicine, such as Boston Scientific Corp. (BSX), which accounts for 8.1% of the fund, Eli Lilly (5.2%) and UnitedHealth (2.8%). Additionally, fund manager Edward Yoon has been at the helm since 2008, and market gyrations aren’t going to rattle a seasoned fund chief. BSX has returned 18.2% over the past 12 months and a reasonable 9.9% year to date, which somewhat helped the fund keep losses in check.
The fund holds a four-star Morningstar rating and has leveled out with a 4.6% return over the past three months.
[Read: 7 Best Biotech ETFs to Buy Now]
Health Care Select Sector SPDR ETF (XLV)
This $33 billion fund tracks the Health Care Select Sector Index, holding 60 stocks with a 100% focus on health care. It’s highly cost-efficient, with an expense ratio of 0.08% and a 30-day SEC yield of 1.8%.
Rated five stars by Morningstar, XLV is flat so far in 2025, and down 9.9% over the past full year. Like FSPHX, Health Care Select has stabilized over the past three months, rising 1.4% during that time. JNJ and ABBV are among the fund’s best performers, with shares up 14.5% and 18.3%, respectively, in the past 12 months.
Philosophically, the fund targets stable health care companies with reliable pricing and yields. That’s why industry stalwarts like LLY, UNH, JNJ and ABBV are at the top of its holdings (these stocks make up about 35% of the fund as of Sept. 26).
The fund also reduces risk by diversifying across pharmaceuticals, health care services, and equipment and supply stocks. Its fund strategy may be vanilla, but safety seekers won’t mind.
Invesco S&P 500 Equal Weight Health Care ETF (RSPH)
This Invesco health care ETF is down 1.4% year to date and has only hit the “plus” column once in the past three years (in 2023, when the fund returned 4% for the year). RSPH is designed to offer ample exposure to the S&P 500 Equal Weight Healthcare Index, minus fees and expenses. At $686 million in total assets, RSPH is considered one of the most respected mid-to-large health-focused ETFs on the market.
RSPH doesn’t heavily favor any one position — none of its 60 equity holdings represents more than 2% of the fund. That’s by design, as all so-called equal-weight ETFs have roughly the same strategy.
The fund’s top 10 holdings include familiar names such as Centene Corp. (CNC) and AbbVie. The top 10 make up only 18% of the fund as of Sept. 26.
Fund investors pay a relatively higher fee than with larger health care ETFs, at 0.4%, and they receive a relatively weaker yield (0.8%) compared with XLV and VHT. The fund receives a four-star rating from Morningstar, however. On the pricing point, for example, the ratings firm notes that RSPH offers good cost value when compared to its direct peers.
SPDR S&P Biotech ETF (XBI)
XBI is making a big recovery in the second half of 2025, up 8.8% year to date by net asset value, compared with a 4.3% gain for its category. Its one-year return is barely underwater, clocking in at a 0.2% loss against a 0.1% loss for the category. XBI yielded positive returns in 2023 (7.6%) and 2024 (1%), but it hasn’t achieved double-digit yearly gains since 2020 (48.3%) during the COVID-19 pandemic, when health care was a top market performer.
Structurally, this passively managed SPDR fund tracks the performance of the S&P Biotechnology Select Industry Index, which primarily includes companies in the biotech segment of the S&P Total Market Index. XBI favors smaller and midsize biotech companies, which adds a higher element of risk to the fund. As far as size goes, at $5.6 billion in assets, XBI is one of the larger biotech-flavored ETFs.
The fund is widely diversified, with 132 equity holdings, and the top 10 holdings make up 19% of total assets. The landscape looks better for the sector, with biotech stocks rallying this past spring. XBI jumped about 6% in May based on industry earnings and renewed investor interest in biotech stocks. Around that time, the Trump administration had offered to work with biotech firms on prescription drug prices and to push the U.S. Food and Drug Administration to speed up drug-approval processes. Biotech industry stocks have been steadily making gains since that time and are up about 15% over the past six months.
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6 Best Health Care Funds and ETFs for 2025 originally appeared on usnews.com
Update 09/29/25: This story was published at an earlier date and has been updated with new information.
