FHLC vs. BBH: Which Healthcare ETF Is the Better Buy?

Choosing between a broad healthcare fund and a focused biotech fund comes down to how much risk -- and potential reward -- an investor is willing to take on. The Fidelity MSCI Health Care Index ETF (NYSEMKT:FHLC) and the VanEck Biotech ETF (NASDAQ:BBH) both offer exposure to the healthcare sector, but they go about it in very different ways.

FHLC tracks a broad index of pharmaceutical, medical device, and healthcare service companies, whereas BBH focuses specifically on the 25 largest US-listed biotechnology firms.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

FHLC is the far cheaper option for long-term investors, charging an expense ratio of just 0.08% compared to BBH's 0.35%. FHLC also pays a higher trailing dividend yield of 1.40%, nearly 0.9 percentage points more than BBH's 0.51%. Over time, that combination of lower fees and a higher yield can add up meaningfully for buy-and-hold investors.

Performance & risk comparison

What's inside

Launched in 2013, FHLC tracks a broad basket of 338 holdings across the entire healthcare landscape, including pharmaceutical, device, and service firms. Its largest positions include Eli Lilly & Co (NYSE:LLY) at 14.0%, Johnson & Johnson (NYSE:JNJ) at 8.6%, and AbbVie (NYSE:ABBV) at 6.1%.

BBH is a much narrower strategy, holding just 25 stocks involved in biotechnology, genetic research, and diagnostics. Top holdings include Gilead Sciences (NASDAQ:GILD) at 14.1%, Amgen (NASDAQ:AMGN) at 13.9%, and Vertex Pharmaceuticals (NASDAQ:VRTX) at 8.1%. The fund was launched in 2011.

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What this means for investors

The choice here really comes down to risk tolerance and what you're seeking from a healthcare ETF. FHLC is built for investors who want steady, diversified exposure to the healthcare industry without betting heavily on any one subsector -- and its low 0.08% expense ratio and 338-stock portfolio make it a reasonable "set it and forget it" option for a core healthcare holding.

BBH, on the other hand, is much more targeted. Biotech stocks tend to be more volatile than the broader healthcare sector because their fortunes often hinge on binary events -- drug trial results, FDA approvals, or patent cliffs -- rather than steady, predictable revenue streams.