Healthcare Stocks for Retirement Investors: 1 Stock, 1 ETF, 1 Mutual Fund

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When it comes to retirement, nothing can wreck a carefully laid plan more than unexpected healthcare-related expenses.

Healthcare Stocks for Retirement Investors: 1 Stock, 1 ETF, 1 Mutual Fund

According to mutual fund giant Fidelity, those expenses can top more than $245,000 for a 65-year-old, healthy couple over the course of their retirement. Nearly a quarter of a million dollars. That’s a big number and for some investors it could represent everything they’ve saved for retirement in total.

But that big number also shows exactly why investors — especially those nearing or in retirement — need to own a swath of healthcare stocks. There’s no need to be a victim or deal with such unexpected costs without a fight.

Healthcare stocks continue to see their stars rise as the combination of rising demand and therapy/drug costs truckle towards their bottom lines. Demand is coming from all angles — rising populations of all ages — while hard-to-treat diseases are the flavor du jour for new drugs.

At the end of the day, it creates a long-term bullish tailwind for healthcare stocks.

And while investors may not be able to recoup all of their medical expenses in retirement via healthcare stock ownership, it certainly will not hurt. Here’s one stock, one exchange-traded fund (ETF) and one mutual fund to buy in the sector.

Healthcare Stocks For Retirement: McKesson Corporation (MCK)

Healthcare Stocks For Retirement: McKesson Corporation (MCK)

When it comes to healthcare stocks and retirement, boring is often better. Despite the return potential, you can’t afford to lose a ton on biotech start-ups at this point.

However, boring doesn’t mean “no growth” or no potential.

Case in point: McKesson Corporation (MCK).

MCK operates in the boring area of drug and supply distribution. It doesn’t create the drug or sell it, but merely bundles it together with other supplies a hospital, pharmacy and doctor’s offices may need and sends it out. It’s as boring as they come.

But when you are the LARGEST distributor of medical goods, boring is crazily profitable. For its latest fiscal year, MCK saw a 9% jump in its profits.

And it’s crazy good for your investors, too. It has grown its dividend 366% over the last ten years.

In fact, the profits are so good, that McKesson is planning out spinning out its healthcare IT division to focus on growing its distribution arm. This should help keep this boring stock churning out big-time dividend payments to retired investors.

When it comes down to it, MCK stock could be one of the best picks in healthcare — for those in retirement or not.

Healthcare Stocks For Retirement: Vanguard Health Care ETF (VHT)

 [Next Page ...] Healthcare Stocks For Retirement: Vanguard Health Care ETF (VHT)Expenses: 0.09%, or $9 per $10,000 invested

When it comes to broad indexing, you really can’t beat powerhouse Vanguard. The low cost leader has made cheap indexing its mantra and that fact is true for healthcare stocks as well. The Vanguard Health Care ETF (VHT) is its low-cost ETF in the space.

VHT tracks the broad MSCI US Investable Market Health Care 25/50. That’s basically a fancy way of saying all the healthcare stocks domiciled in the United States. That includes small-, mid- and large-cap firms. All in all, the ETF holds 361 different firms, including stalwarts like Johnson & Jonson (JNJ) and small frys like knee-replacement specialist ConforMIS Inc (CMFS).

That huge ownership profile makes it a prime choice for investors looking for simple exposure to healthcare stocks.

The broad exposure has helped on the return front as well. VHT is market-cap weighted. But roughly half of the fund is in mid- and small-caps. That’s helped the fund power through a healthy 11.3% annual total return over the last ten years.

Also helping power that return has been VHT’s low expenses. Currently, the fund charges just 0.09%, or $9 per $10,000 invested, in annual fees.

Simply put, VHT is one of the best broad ways to for investors to get their portfolios more healthy.

Healthcare Stocks For Retirement: Fidelity Select Health Care Portfolio (FSPHX)

Fidelity mutual fundsExpenses: 0.73%

For those investors looking for an active approach to owning healthcare stocks, the Fidelity Select Health Care Portfolio (FSPHX) is a great choice.

FSPHX’s goal is to outperform the previously mentioned MSCI US Investable Market Health Care 25/50 — VHT’s index. And it has largely succeeded, returning 13.5% annually over the last ten years. However, it has been a much bumpier ride than VHT’s. The fund is down significantly over the one-year period versus VHT.

The outperformance has come from FSPHX’s managers eschewing some of the indexes conventions. This includes adding non-U.S. stocks — like Teva Pharmaceutical Industries Ltd (ADR) (TEVA) — as well as overweighting “high-tech” healthcare sectors like biotech and health care equipment. These moves add plenty of “growth” to the portfolio.

The mutual fund also holds less overall healthcare stocks and currently includes just 115 names. The combination of these factors is enough to help it on the performance front throughout its long history.

As for expenses, FSPHX isn’t VHT cheap, but it is pretty cheap by actively managed specialty mutual fund standards. Costs for the healthcare fund come in at just 0.73%.

With a Morningstar four-star rating, FSPHX could be one of the best ways to add an actively managed tilt towards healthcare stocks.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.

Aaron Levitt is an investment journalist living in Ohio. With nearly two decades of experience, his work appears in several high-profile publications in both print and on the web. Also likes a good Reuben sandwich. Follow his picks and pans on Twitter at @AaronLevitt.


Article printed from InvestorPlace Media, https://investorplace.com/2016/07/healthcare-stocks-retirement-mck-vht-fsphx/.

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