Investors choose between Fidelity MSCI Healthcare Index ETF (NYSEMKT:FHLC) and State Street Health Care Select Sector SPDR ETF (NYSEMKT:XLV) The former is likely to provide broader market cap exposure, while the latter offers superior liquidity and a higher trailing 12-month dividend yield.
Both funds target the domestic healthcare sector and offer exposure to pharmaceutical, biotechnology and equipment suppliers. While FHLC covers a broader range of company sizes, including mid- and small-cap stocks, XLV focuses strictly on the healthcare components of the S&P 500.
This choice between broad market diversification and top-line concentration is a central consideration for investors looking to gain exposure to a specific sector.
Snapshot (cost and size)
|
Metric
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FHLC
|
XLV
|
|
Editor
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Fidelity
|
SPDR
|
|
Expense ratio
|
0.08%
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0.08%
|
|
1 year return (starting May 18, 2026)
|
18.59%
|
16.86%
|
|
Dividend yield
|
1.40%
|
1.70%
|
|
Beta
|
0.61
|
0.58
|
|
AUM
|
2.9 billion dollars
|
$37.5 billion
|
Beta measures price volatility relative to the S&P 500; Beta is calculated from five years’ monthly returns. The 1-year return represents the total return over the past 12 months. The dividend yield is the distribution yield for the trailing 12 months..
Both funds are highly profitable with equal expense ratios of 0.08%. However, the State Street fund offers a slightly higher payout for income seekers, with a trailing 12-month dividend yield of 1.7% compared to 1.4% for the Fidelity fund. This difference in performance may be attractive to those who prioritize current earnings over slightly higher recent growth.
Return and Risk Comparison
|
Metric
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FHLC
|
XLV
|
|
Maximum reduction (5 years)
|
(17.70%)
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(17.10%)
|
|
$1,000 growth in 5 years (total return)
|
$1,231
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$1,284
|
What’s inside?
The State Street Health Care Select Sector SPDR ETF offers concentrated exposure to 60 large-cap healthcare stocks. His most important positions include Eli Lilly & Co (NYSE:LLY) at 15.18%, Johnson & Johnson (NYSE:JNJ) at 10.42%, and Abvie (NYSE: ABBV) at 7.09%. Launched in 1998, it provides a 100% allocation to the healthcare sector and has paid $2.51 per share over the last 12 months. This fund focuses exclusively on established, highly liquid companies that fall within the S&P 500 benchmark index.
The Fidelity MSCI Health Care Index ETF employs a much broader strategy with 365 holdings. Its top positions include Eli Lilly & Co with 13.16%, Johnson & Johnson with 8.90% and AbbVie with 6.06%. Launched in 2013, the fund has a trailing 12-month dividend of $1.01 per share. By tracking the MSCI USA IMI Health Care Index, you capture small- and mid-cap companies that your competitor omits, while still investing entirely in healthcare stocks.
For more guidance on investing in ETFs, check out the full guide at this link.
What this means for investors
For investors looking for stocks in the healthcare industry, the State Street Health Care Select Sector SPDR ETF (XLV) and the Fidelity MSCI Health Care Index ETF (FHLC) offer an efficient way to gain that exposure. These pair of funds take very different approaches, so deciding which one to invest in depends on which strategy best suits your goals.
XLV focuses its holdings on healthcare companies within the S&P 500. That’s why it only has 60 holdings, although its much higher AUM may attract active traders. However, more than 25% of the ETF is focused solely on Eli Lilly and Johnson & Johnson. Consequently, the fund’s performance depends largely on these businesses.
XLV’s higher dividend yield and focus on blue-chip companies may appeal to more conservative investors and those who want to buy and hold for the long term.
FHLC offers a much more diversified fund with over 300 holdings, including mid- and small-cap stocks that are not available on XLV. This diversification reduces dependence on a few companies and opens up the potential for higher profits, as smaller companies tend to grow faster than their larger-cap brethren, as evidenced by FHLC’s higher one-year performance.
That said, smaller companies tend to deliver more volatile performance, which contributed to FHLC’s higher beta and cap draw. FHLC is for investors who want broad exposure to the healthcare sector and are comfortable with higher risk and volatility as a trade-off for the potential for higher returns.
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Robert Izquierdo has positions at Johnson & Johnson. The Motley Fool has posts and recommends AbbVie and Eli Lilly. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
Better Health Care ETF: Fidelity’s FHLC vs. State Street’s XLV was originally published by The Motley Fool
