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Vanguard Health Care: A Good Place To Invest For The Future


  • The increasing prevalence of a few diseases has caused the life expectancy in the United States to decline for the third straight year.
  • One of these diseases is diabetes, which is a chronic condition linked to rising obesity rates and it is only going to get more common over time.
  • This should bode well for healthcare companies as this increases the demand for their services.
  • Healthcare is a defensive sector that has consistently beaten the S&P 500 over the past fifteen years.
  • VHT is a good, low-cost way to play the sector.
  • Looking for a community to discuss ideas with? Energy Profits in Dividends features a chat room of like-minded investors sharing investing ideas and strategies. Get started today »

Last week, the Centers for Disease Control reported that the average life expectancy in the United States has fallen for the third straight year. The primary reasons that the agency gave for this trend was an increase in deaths from suicide, the flu, diabetes, and drug abuse. In short, we have a rising death rate due to an increasing prevalence of both diseases and substance abuse. While this is undoubtedly a very strong negative for society as a whole, it also tells us that the demand for healthcare services is likely to surge over the coming years as people seek out treatment for these conditions. One way that investors can take advantage of this is by purchasing shares of the Vanguard Health Care ETF (NYSEARCA:VHT).

About The ETF

The fund is designed to track the performance of the MSCI US Investable Market Index/Health Care 25/50, an index made up of stocks of large, mid-size, and small U.S. companies within the healthcare sector. This category includes both manufacturers of healthcare products, such as medical device providers and pharmaceuticals, as well as providers of healthcare services, such as hospital operators. It thus provides us with a broad spectrum of companies that are likely to benefit from people seeking out assistance with their medical problems.

As is the case with many industries in the United States, the index is dominated by a few large firms. In fact, the index itself has been modified from a purely market capitalization-weighted one to accommodate the dominance of a handful of very large firms. This is necessary because of a provision in the US Internal Revenue Code that limits the holdings of registered investment companies, which would include most ETFs. One of these rules is that no more than 25% of the value of the fund's assets can be invested in a single issuer

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Power Hedge is an independent stock research and analysis firm with a passion for macro- and microeconomic analysis. Power Hedge focuses our research primarily on dividend-paying, international companies of all sizes with sustainable competitive advantages. Power Hedge is neither a permabear nor a permabull. However, we believe that, given the current structural problems in the United States, the best investment opportunities may lie elsewhere in the world. The firm's strategy is primarily buy and hold, but will stray from that strategy on occasion. Our ideal holding period is forever, however we realize that both internal and external forces can impact an investment. For this reason, we believe that it is vital to keep a close eye on all of your investments. We do not believe in changing an investment based on short-term market swings.

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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am long NVO through closed-end healthcare funds.

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