If there is one thing I know for sure, is that we all get sick at one moment of the other.
With the rich world becoming older, the increase of obsity, diabetis, heart disease, and even mental health, the Health Care sector will be a sector that will always be in high demand.
Sickness is inelastic and independent of economic cycles. People get just as sick when the economy is doing good as when the economy is doing bad.
It’s for that reason that I am a strong believer in the Health Sector and I believe that it should take a special slice in my portfolio.
This January I bought VHT at $259.51. At this point I am up 1%, but I am sure that on a 10 year time horizon, I will have on average an 8%/year rate of return.
VHT is sold by Vanguard. The name is Vanguard Health Care ETF. Its expense ration is 0.10%. That’s a great deal.
There are about 440 stocks in the index and the average return for the last 10 years is about 15% per year. That’s very compelling.
Here are the top 10 holdings:
| 1 | UnitedHealth Group Inc. | 7.76% |
| 2 | Johnson & Johnson | 7.50% |
| 3 | Pfizer Inc. | 4.56% |
| 4 | AbbVie Inc. | 4.52% |
| 5 | Thermo Fisher Scientific Inc. | 3.71% |
| 6 | Abbott Laboratories | 3.69% |
| 7 | Eli Lilly & Co. | 3.52% |
| 8 | Merck & Co. Inc. | 3.35% |
| 9 | Danaher Corp. | 3.06% |
| 10 | Bristol-Myers Squibb Co. | 3.02% |
However, I also notices that there is a strong correlation between the health sector and the S&P 500 is quite strong. During the past 50 years, both the S&P 500 and VHT has increased in value about 90%; that’s about 18% per year. That’s some serious return.
As the population is getting older, an very few people seems to care about their health (they continue to consume sugar and fats and getting more obese), I feel that the health sector will continue to increase in value.