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The healthcare sector is generally regarded as a more defensive sector overall. Nevertheless, building uncertainties surrounding the government healthcare changes and mandates remain a drag. Some believe the current law loosely referred to as Obamacare will not take place as planned. This may prove positive for Healthcare providers and their profitability. Also government policies to speed new drug approvals have benefited major drug companies.

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There is a lot to choose from in terms of indexes linked to ETFs. Some indexes are passive and duplicative relatively while some are "enhanced" making them quasi-active. The latter apply quantitative analytical techniques and skills to provide outperformance. Investors should note that in a rising market particularly ETFs linked to enhanced issues may outperform conventional index linked issues. I've not done enough analysis to determine their relative performance during down market periods but the opposite may be true.

There is currently an expanding list of 24 ETFs oriented to the healthcare sector with more on the way. The following analysis features a fair representation of ETFs available. We believe from these investors may choose an appropriate ETF to satisfy the best index-based offerings individuals and financial advisors may utilize. We've winnowed the list down to 10 without ranking them providing investors a more manageable list of offerings.

ETFs are based on indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones and so forth. Also included are some so-called "enhanced" indexes that attempt to achieve better performance through more active management of the index.

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

PowerShares Dynamic Pharmaceuticals ETF (PJP)

PJP follows the Dynamic Pharmaceuticals Intellidex Index, which is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors. The fund was launched in June 2005. The expense ratio is 0.60%. AUM equal $500M and average daily trading volume is over 100K shares. As of May 2013 the annual dividend yield was 1.25% and YTD return 24%. The one-year return was 41%.

iShares S&P Global Health Care ETF (IXJ)

IXJ follows the S&P Global Health Care Index including a wide range of companies from biotech, manufacturing, medical devices and pharmaceuticals. The fund was launched in November 2001. The expense ratio is 0.48%. AUM equal $838M with average daily trading volume around 80K shares As of May 2013 the annual dividend yield was 1.88% and YTD return 21%. The one-year return was 38%.

iShares Dow Jones U.S. Medical Devices Index ETF (IHI)

IHI follows the Dow Jones U.S. Select Medical Equipment Index, which measures the entire spectrum of equipment in the U.S. equity market. The fund was launched in May 2006. The expense ratio is 0.48%. AUM equal $367M with average daily trading volume around 60K shares. As of May 2013 the annual dividend yield was 0.49% and YTD return 17%. The one-year return was 25%.

iShares Dow Jones U.S. Pharmaceutical ETF (IHE)

IHE follows the Dow Jones U.S. Select Pharmaceutical Index, which measures the performance of this sector of the U.S. equity market. The fund was launched in May 2006. The expense ratio is 0.48%. AUM equal $465M and average daily trading volume is 40K shares As of May 2013 the annual dividend yield was 1.34% and YTD return 20%. The one-year return was 28%.

First Trust Health Care AlphaDEX ETF (FXH)

FXH follows the StrataQuant Health Care index, which is an "enhanced" index developed, maintained and sponsored by the NYSE Euronext or its affiliates which employs the AlphaDEX stock selection methodology to select healthcare stocks from the Russell 1000 Index. The fund was launched in May 2007. The expense ratio is 0.70%. AUM equal $864M and average daily trading volume is 130K shares. As of May 2013 the annual dividend yield was 0.35% and YTD return 24%. The one-year return was 37%.

SPDR S&P Pharmaceuticals ETF (XPH)

XPH follows the S&P Pharmaceuticals Select Industry Index, which measures the pharmaceuticals sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, and NASDAQ National Market and NASDAQ Small Cap exchanges. The Pharmaceuticals Index is an equal weighted market cap index. The fund was launched in June 2006. The expense ratio is 0.35%. AUM equal $400M and average daily trading volume is less than 30K shares. As of May 2013 the annual dividend yield was 1.39% and YTD return 25%. The one-year return was 28%.

iShares DJ U.S. Health Care Providers ETF (IHF)

IHF tracks the Dow Jones U.S. Select Healthcare U.S. equity market. As such the index contains fewer holdings. The fund was launched in May 2006. The expense ratio is 0.48%. AUM equal $285M with average daily trading volume over 30K shares. As of May 2013 the annual dividend yield was 60% and YTD return 20%. The one-year return was 37%.

SPDR Healthcare Select Sector ETF (XLV)

XLV follows the Health Care Select Sector Index. The fund was launched in December 1998. The expense ratio is 0.18%. Assets under Management (AUM) equal $7B and average daily trading volume is over 7.8M shares. As of May 2013 the annual dividend yield was 1.25% and YTD return 23%. The one-year return was 37%.

XLV is the oldest and largest ETF in this category.

ProShares features leveraged long (NYSEARCA:RXL) and short (NYSEARCA:RXD) ETFs linked to similar indexes. DirexionShares also offers a leveraged long (IXV) ETF linked to this S&P Index.

Vanguard Health Care ETF (VHT)

VHT follows the MSCI US Investable Market Health Care 25/50 Index and is another broad index covering the entire spectrum of the healthcare industry. The fund was launched in January 2004. The expense ratio is 0.14%. AUM equal $1.6 billion and average daily trading volume is a low 150K shares. The lower volume indicates Vanguard's financial advisor audience with more of a buy and hold philosophy. As of May 2013 the annual dividend yield was 1.36% and YTD return 23%. The one-year return was 38%.

VHT trades commission free at Vanguard.

iShares Dow Jones U.S. Health Care ETF (IYH)

IYH follows the Dow Jones U.S. Health Care Index, which includes most constituents from the healthcare sector. The fund was launched in June 2000. The expense ratio is 0.48%. AUM equal over $1 billion while average daily trading volume is just fewer than 90K shares. As of May 2013 the annual dividend yield was 1.04% and YTD return 4%. The one-year return was 39%.

Summary

Healthcare generally is a hot topic given proposed and controversial changes in the structure of the healthcare system. However, with the listings shown most constituent weightings are in pharmaceutical companies with only an occasional healthcare provider visible. So, as goes pharma, so goes this sector. Technically these ETFs are all extremely overbought which can last longer than one can imagine.

With this sector It's essential to remember it's really a game of battleship for sponsors seeking to be first to a sector space or just being competitive in the space. This is their business interest apart from your investment interest. You should always ignore their interests and align your choices with what serves your objectives best.

Source: Top 10 Healthcare Sector ETFs