Healthcare stocks are a huge sector. In fact, they make up the second-largest sector of the S&P 500 index, comprising about 20% of the total.
Healthcare stocks are not in one industry
Healthcare stocks might be a good option for investors looking for portfolio diversification or those seeking growth from specific sectors rather than the market as a whole. Industries include:
- Biotech – drugs and medical treatments that are grown from living organisms.
- Pharmaceuticals – prescription medicine.
- Medical devices – products like pacemakers, hip implants, and replacement parts for joints.
- Health insurance – managed care providers include Medicare, Medicaid, and private health insurers like Blue Cross Blue Shield that provide coverage for their members through employer-sponsored plans or individual policies.
- Hospitals – institutions where patients receive treatment and long-term care such as rehabilitation services after leaving the hospital or during an outpatient visit.
Health care stocks are a great choice for any portfolio. Investing in the health of people worldwide is good for everybody, and it's also good for your bottom line. But how do you start investing in healthcare stocks?
Why invest in healthcare stocks?
Healthcare is a growing industry that is expected to expand at a faster rate than the overall economy. This provides investors with a great opportunity to diversify their portfolios and capitalize on that growth. Not only that, but there are many different types of health care stocks—including hospitals, insurance companies, medical device companies, pharmaceuticals, and biotechnology—making it easy to find one that fits your needs. And if you're looking to invest in something that has a positive impact on society? You can't go wrong with this sector!
How to invest in healthcare stocks?
Now that you know why you should invest in health care stocks, let's talk about how to do it! There are several ways to get started: choose an industry, analyze individual companies' financial statements or purchase exchange-traded funds (ETFs) which track the performance of a particular sector as well as specific companies within that sector.
Change is inevitable
Whether you're a health care aficionado or just an interested onlooker, you've probably noticed that there's been a ton of change in the sector lately. There are so many new ideas coming from so many unexpected places that it can be hard to keep track of them all, but we're here to help.
From the biggest growth in healthcare stocks to the most disruptive healthcare ideas of the future, we've rounded up some of the most exciting trends we've seen in the last five years. We'll only be touching on a handful of these—because let's face it, there are just too many to cover!
AI & Robotics
First off, artificial intelligence and robotics will fundamentally alter how we diagnose and treat patients. The past few years have seen incredible strides in this area—from "deep learning" technologies that can scan your medical records and make predictions about your disease to robotic surgery tools that function like an exoskeleton, allowing surgeons to do procedures with less risk of damage to their bodies. These tools may not be a cure-all for every medical condition, but they have the potential to make an incredible impact on people's lives—and improve healthcare for everyone.
There's also biotechnology: The incorporation of DNA into living tissue has led to incredible breakthroughs like CRISPR-Cas9, which can edit human genes inside living cells with incredible precision and speed. And while it's still early, it shows great promise!
But what about the individual companies and their focus areas? Well, here's a few for good measure, just remember to do proper due diligence before you decide to invest in any of them:
Companies in the healthcare sector
- Deep Genomics (genomics)
- AiCure (artificial intelligence)
- Atomwise (Artificial intelligence)
- Lyndra Therapeutics (long-acting pill)
Risks involved in the failure of healthcare companies:
-In the year 2016, Johnson & Johnson was charged $55 million for losing track of a patient who was enrolled in a drug trial. The patient died because of his exposure to the drug, and Johnson & Johnson ended up with all sorts of fines, assessments, and legal fees.
-The company founded by Dr. Edward Samulski, a University of North Carolina at Chapel Hill professor, was manufacturing adeno-associated viral vectors for gene therapy. One day in 1999, during a quality control inspection at the site where the manufacturing was being done, one of the samples tested positive for a cancerous virus. Unfortunately, this virus had already been used in gene therapy trials taking place in France and Italy. Almost every single patient involved in those trials contracted cancer and passed away.
These two examples show that investing in healthcare also carries the risk of results that are the opposite of what you wish to achieve. It can be harmful to lives and detrimental to a company's business and/or brand. Of course, that should not be the expectation, as healthcare should improve lives after all. But it proves once more, the importance of research if you choose individual companies in the healthcare sector.
Summary of the positives and negatives
In short, investing in the healthcare sector can bring you:
- An investment in the largest and most stable industry in the world
- An ethical feeling as you support the only sector where you can invest in something that's actually improving people's lives
- A sense of accomplishment as it enables the largest job growth in the U.S. today and will continue to grow for years to come
- A sense of belongingness as you become part of this incredible ecosystem that helps people live better lives
Whilst on the flipside:
- Larger risks of disruptive technologies making current or future ideas obsolete
- Experiments might occasionally backfire resulting in a 'scandal' involving people's health
- The sector makes big theoretical promises that are sometimes not possible to realize