Healthcare and Biotech Investing 101: What you need to know.
- What is your current allocation for healthcare stocks?
- Large cap stocks that pay dividends are the best positioned for growth plus value.
- Start with an ETF plus one Fund.
If you have been reading our artlcles you already know some of the basics of healthcare investing. Healthcare as a sector represents only about 12% of the S&P 500. So if you want to overweight healthcare as a sector you need to add equities. Healthcare is usually a more defensive sector because of demographics and government funding through Medicare. But in 2024 the Technology sector was the winning sector with an S&P weighting of 29.4% so as an investor you did not need to focus so much on healthcare stocks.
Here’s a brief outline:
Plan A -Pick One ETF and One Mutual Fund
- Healthcare Select SPDR (XLV) up 5.67% YTD, Up 6.59% 3 years. 80 %.Top holdings are large cap biopharmas LLY, ABBV,MRK and UNH. 80% allocation.
- For a mutual fund add more health sciences like Fidelity Select Medical Technology (FSMEX) up 5.02% YTD, Down 4.18% 3 yr.or T.Rowe Price Health Sciences (PHRSX) up 4.51% down 0.15% 3 yr. 20 % allocation.
- At an earlier post in 2024 we provided a Review of Healthcare and Life Science Mutual Funds.
Plan B -Same as Plan A but add 10% beta for Biotech in bull markets: SPDR S&P Biotech (XBI) down 5.34% YTD, down 14.8% in 3 years, equal weighting adds small caps to a portfolio.
Plan C for Experienced Traders only with some added speculation. Manage a portfolio.
- Pick your favorite large cap biopharma and medtech stocks.
- Trade small caps and XBI hoping to hit it big HIT early with a Regeneron (REGN) or a ThermoFisher (TMO).
- Rotate your portfolio among sectors from healthcare to industrials and energy etc.
In the coming week we will update on our SMID cap speculative LIFE SCIENCE trading strategy and Financial metrics for Large Cap BIopharmaceuticals.
Key question moving forward “are you an investor or trader?”