Overview of the Schwab Healthcare ETF

The secret to top-level investing is easy: find a commodity or service whose value does not degrade.

The Schwab Healthcare ETF is one of the best exchange-traded funds (ETF) you can add to your portfolio. According to recent data, the long-time established healthcare fund remains in excellent standing despite the US economy’s ups and downs.

If it’s your first time to add a healthcare ETF to your investment portfolio, here are a few things you need to know about healthcare ETFs first. Furthermore, we’ll give you insight and comparisons of the Schwab Healthcare ETF against other top fourth-quarter healthcare ETFs in 2020.

What is Healthcare ETF?

An exchange-traded fund (ETF) collects stocks from numerous businesses in a single or mixed industry. A healthcare ETF, such as Schwab Health Care, is a diversified collection of stocks that focus on everything happening in the healthcare industry.

Healthcare ETFs expose investors to growth in medical equipment procurement, medical technology improvements, private hospital activities, and funding, to name a few.

Joining a healthcare ETF brings many advantages, such as a stabilizer for your portfolio, especially if you’re an investor with a high appetite risk.

Despite bull and bear markets, healthcare industries and businesses have always thrived. For example, the Covid-19 outbreak in 2020 saw an enormous uptick in medical supply and equipment manufacturing, quality control, and research. Indeed, investors saw a great increase in healthcare ETF value during the time.

However, it has advantages and disadvantages, like any other investment vehicle.


  • Diversification

A single healthcare ETF, such as the Schwab Health Care Fund, holds dozens of healthcare stocks in the market. Additionally, the market is broad, similar to other industries, such as computer and technology, mining, construction, and infrastructure development. Therefore, you can expect all healthcare ETFs to remain balanced across numerous industries, giving you stable and virtually guaranteed returns upon investing.

  • Industry-Targeting

On the other hand, some ETFs focus only on specific industries. For example, biotechnology is a rapidly-evolving industry. Some healthcare ETFs focus on investing in numerous bio-technology-oriented companies to take advantage of their skyrocketing growth.

    • On the other hand, you can expect targeted healthcare ETFs to hold a higher risk and less diversification than its non-targeted variation. However, during the most bullish markets in the healthcare industry for these specific industries, you can see plenty of growth.


  • Possible Stagnancy

Diversified healthcare ETFs will always prevail and pay within optimal or pessimistic estimates. They’re predictable, making them the best but an enormous investment for low-risk appetite investors.

On the other hand, growth-oriented investors fast-tracking their portfolios will find healthcare ETFs an excellent safety net because of their stagnancy. Growth in the sector has strict limitations because of the slow technological and equipment progress, requiring in-depth study, peer evaluation, and maximum safety quality checks.

Regulations and limitations in other markets create stagnancy and minuscule growth, which still rings true with healthcare ETFs.

  • Requires an Enormous Amount of Technical Knowledge

The only way to invest exceptionally in any market is to invest in technical knowledge about it. Investors who find medical technologies, practices, implications of existing and new medical equipment, and healthcare market movements will find healthcare ETFs a challenging but rewarding market.

Therefore, the healthcare ETF industry reserves itself to investors willing to understand and take note of immense technical and scientific knowledge. Truthfully, much of medical technologies focus on healthcare improvement, meaning investors need to know its contributions to operating procedures, hospitals, and patients suffering specific health problems.

Everything You Need to Know About the Schwab Healthcare ETF (SWHFX)

One of the healthiest and average-performing funds in the market is the Schwab Healthcare ETF (SWHFX). In the last decade, its performance has been stellar and grew immensely in 2020 after the economic downturn that Covid-19 caused during the year.

Here are some specifics:

  • Performance over 1-Year: 9.57
  • Expense Ratio: 0.80%
  • Annual Dividend Yield: 1.02%
  • 3-Month Average Daily Volume: -3.31
  • Assets Under Management: UnitedHealth Group (UHG), Johnson and Johnson (JNJ), Merck & Co Inc. (MRK), Abbott Laboratories (ABT)
  • Inception Date: July 3, 2000
  • Issuer: Schwab Healthcare Fund

About The Schwab Healthcare ETF

Fund managers of the Schwab Healthcare ETF place the entire fund inside the healthcare industry, just as any healthcare ETF.

It changes its course by purchasing equity securities that healthcare sector companies issue. SWHFX doesn’t focus on a single industry, meaning it is a prime example of a well-diversified portfolio.

It will invest in pharmaceutical, biotechnology, medical technology development, medical science, and other industries its fund managers see fit to grow in the next few years.

The Schwab Healthcare ETF aims to produce long-term capital growth. For investors with high-risk appetites, it means limited portfolio growth. However, it remains a stable source of income despite any economic downturn. Truthfully, it’s the best choice for low-risk appetite investors because of its consistency and stability.

The fund has a solid policy: it will invest around 80% of its assets in various healthcare industries providing equity securities. Any investor comfortable putting almost all their eggs in the healthcare industry have nothing to lose with the SWHFX

Why Is It Worth Investing in the Schwab Healthcare ETF?

The Schwab Healthcare ETF (SWHFX) is one of the top 20 highest-performing and most stable healthcare ETFs in the United States’ health sector.

According to US News Money, it came as 18 out of 124 of the best health funds existing in the country. Leading healthcare fund industry researchers consider SWHFX to be an essential healthcare ETF for any portfolio requiring a dependable safety net during economic downturns.

  • Fees

SWHFX has nominal to below-average fees if you compare this figure among its peers. It has an expense ratio of 0.8%, which is significantly lower than the 1.22% industry average. Additionally, management costs take up only 0.5%, significantly lower than the current category average of 0.74%.

Additionally, SWHFX does not charge anything for initial and deferred maximum sales fees. Furthermore, it does not charge administrative, redemption, and minimum investment fees. It’s one of the best ways to enter the healthcare ETF market with minimal overhead costs.

  • Performance

In the past year, SWHFX returned 9.51% in 2019. In 2017, it returned 8.39% and 7.7% in the last five years. Overall, its one-decade performance has been exceptional by achieving 13.79% during the last decade. While it significantly lags behind Schwab US Large-Cap Growth IDX Fund (SWLGX), which achieves a remarkable 29.16% yearly, Schwab Healthcare Fund is much more stable due to its focus on stability and equity securities.

  • Risks

Morningstar and other significant ETF performance reporters note that SWHFX has average risk by comparing its performance against similar products.

Its uncertainty and volatility measurements are as follows:

    • Standard Deviation: 14.919
    • Mean: 0.763
    • Sharpe Ratio: 0.507

In this light, it’s a great investment for any portfolio requiring stability and safeties during a bear market. On the other hand, it can achieve top-notch results for low-risk investors willing to go steady but surely in their long-term investments.

Comparing Schwab Healthcare ETF Performance With The Best Q4 2020 ETFs

Healthcare ETFs saw a tremendous uptick because of the Covid-19 worldwide pandemic in 2020. One among them is the Schwab Healthcare Fund, which guarantees stability for many investors across the country. On the other hand, it isn’t the only healthcare ETF that saw huge growth in the previous years. Here are three more best-performing Q4 ETFs that might see immense growth in the coming year.

ARK Invest Genomic Revolution Multisector ETF (ARKG)

Like Schwab Healthcare ETF, ARKG focuses on long-term capital growth. However, it invests 80% of its assets in different sectors, such as information technology, materials, energy, and healthcare. All its investment-oriented sectors focus on its goal of supporting the genomic revolution companies, including Twist Bioscience Corporation (TWST), Pacific Biosciences of California Inc (PACB), Teladoc Health (TDOC), and others.

Performance in the Last Five Years

The ARKG has nominal performance in the last half-decade, earning 94.68% value throughout its inception on October 31, 2014. It has an average expense ratio of 0.75% and has a Year-to-Date Total Return of 190.61%

  • Pros

As a multi-sector fund, ARKG has better stability potential than SWHFX theoretically. Schwab Healthcare ETF has an investment focus on biotechnologies, medical technologies, and relevant research and data-gathering ventures. On the other hand, ARKG focuses on technologies and utilities and their significant healthcare allocations, giving investors exposure to industrial and technological growth outside the healthcare market.

  • Cons

Truthfully, an ETF with more diversity will have higher stability yet only earn reasonable growth. The ARKG is not an aggressive earning fund. Like SWHFX, it focuses on long-term capital growth. Short-term hedge-oriented investors will find ARKG a stabilizing asset handy during economic downturns similar to mutual funds.

KraneShares MSCI All China Heal ETF (KURE)

The MSCI China All Shares Health Care 10/40 Index contains hundreds of China’s renowned healthcare institutions concentrating on medical technologies, research, biotechnologies, private healthcare, and more. KraneShares MSCI All China Heal ETF (KURE) monitors this index’s price and yield performance. In this light, it invests 80% of its assets in Chinese-focused healthcare companies, allowing it to track Chinese healthcare companies’ growth and provide investor exposure.

Performance in the Last Five Years

KURE reached 36.42% growth in the last two years. Overall, it has significantly grown since its inception on January 31, 2018, if you compare its performance with ETFs born in the same year. Furthermore, KURE has a Yield-to-Date Total Return of 53.11%

  • Pros

KURE is the perfect alternative to SWHFX because it focuses on the healthcare industry in China. Investors who see great progress in Chinese medical technologies and healthcare and looking for industry exposure will find KURE the best place to start.

  • Cons

However, KURE is non-diversified, meaning it invests only in Chinese healthcare companies and focuses on the MSCI All China Health Care 10/40 Index’s performance. It’s a gateway into the Chinese medical and healthcare industries, but your journey starts and ends only in-country.

Invesco DWA Healthcare Momentum (PTH)

The Dorsey Wright Healthcare Technical Leaders Index (DWHC) contains the fastest-growing healthcare sector companies across the United States. It selects only 30 of the most stable and strong healthcare companies across the country. The Invesco DWA Healthcare Momentum (PTH) focuses on investing 90% in these 30 companies’ securities, allowing investors exposure to any and highly-likely phenomenal growth.

Performance in the Last Five Years

PTH has significantly grown to 159.09% in the last five years. Furthermore, its Yield-to-Date Daily Total Return boasts a 66.19%, making it an appealing ETF for any discerning investor.

  • Pros

The DWHC has an unparalleled capacity to deliver exceptional returns by identifying the best healthcare sector performers. PTH ensures that investors will always get exposure as DWHC continues to update its list.

  • Cons

On the other hand, 30 securities from top performers is a small market. Betting on more than two dozen top-performing healthcare companies with high growth potential sounds like an excellent portfolio until they all experience limited growth.

Healthcare ETFs Aren’t Invulnerable, But They’re Efficient

Many investors dive straight to food and medical services, especially during bull markets. While undeniably a rocky investment road, its risk and payoffs are adequately acceptable for low-risk appetite investors.

The healthcare sector in any country will never cease to grow because of our innate need for excellent healthcare services. Despite their imperfections, healthcare ETFs, such as the Schwab Healthcare ETF, will always remain excellent choices.

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