The Best Health Care ETFs to Buy

Among the S&P 500's 11 major sectors, three are widely considered "defensive" – utilities, consumer staples and health care – thanks to the inelastic demand for the goods and services they provide. Elasticity refers to how sensitive consumer demand is to changes in price. 

For the aforementioned sectors, demand for services and products remains fairly constant regardless of economic conditions, helping companies maintain stable earnings and making their stocks less volatile during downturns.

But among the three, only the health care sector pairs that stability with significant long-term innovation and growth potential. 

From biotech breakthroughs and aging populations to advancements in diagnostics and personalized medicine, the sector offers more than just downside protection – it provides exposure to transformative change.

Why buy health care ETFs?

Investing in health care through individual stocks exposes you to idiosyncratic, uncompensated risks – meaning risks tied to one company or sub-industry that don't offer higher returns in exchange. 

That's because health care isn't a single industry, but rather a complex ecosystem made up of six major subgroups, each with its own structural challenges.

Take biotech. It's known for high volatility because the success of these health care stocks hinges on clinical trials, many of which fail. Companies in this space tend to be boom or bust, and their stock prices reflect that.

Pharmaceutical companies face their own problems, most notably the patent cliff – a sharp drop in revenue that happens when a top-selling drug loses patent protection and generic competitors flood the market. That can wipe out billions in sales in a short time.

Health care providers and services, like hospitals and insurers, are heavily exposed to regulatory risk and public scrutiny – especially following recent events like the assassination of Brian Thompson, the CEO of UnitedHealth Group's (UNH) insurance unit, which reignited debates about the industry's practices.

More stable segments do exist. For instance, medical equipment suppliers and life science toolmakers tend to fly under the radar but offer steady growth with less drama.

That's why using health care ETFs makes sense. It spreads your exposure across all of these sub-industries, which don't always move in tandem. 

When one segment stumbles, another may outperform, giving you a smoother ride and broader access to both stability and innovation.

How we chose the best health care ETFs to buy 

To narrow the field, we focused only on broad health care sector ETFs. That means we excluded more niche funds that home in on specific industries such as biotech, pharmaceuticals or medical tools. 

We also left out leveraged and inverse ETFs, which are typically geared toward short-term traders – not long-term investors.

From there, we used the standard trio of fees, liquidity and reputability to evaluate our picks:

Fees: There's little reason to pay more than 50 basis points (0.5%) in annual expenses for a sector ETF in 2025, especially when many charge a fraction of that.

Liquidity: The best ETFs should be easy to trade. That means a tight 30-day median bid-ask spread to minimize implicit costs when buying or selling shares.

Reputability: We gave preference to health care ETFs from established asset managers with strong track records and funds that have enough assets under management (AUM) to avoid risk of closure due to low investor interest.