Exchange Traded Funds (ETFs)

ETF Talk: Profit from Aging Baby Boomers

As Americans continue to age and to live longer lives, what could offer a more stable investment than healthcare? The Vanguard Health Care ETF (VHT), in particular, provides just such an investment opportunity. Healthcare historically has remained a stable investment, but now that the baby-boomer generation is starting to retire, the healthcare sector is poised to make significant gains. Indeed, VHT has been on the rise, opening the year at $61.93 and closing at $65.97 on May 15.

The Vanguard Health Care ETF (VHT) seeks to track the performance of a benchmark index that measures the investment return of stocks in the healthcare sector. This index focuses on companies involved in providing medical or heath care products, services, technology, or equipment. Even though VHT follows a narrow sector, it is diversified within the healthcare industry, which offers relative stability for investors who seek growth, as well as the preservation of their capital.

As of April 30, VHT’s top five holdings were Johnson & Johnson (JNJ), 10%; Pfizer Inc (PFE), 9.9%; Merck & Co Inc (MRK), 6.6%; Abbott Laboratories (ABT), 5.4%; and UnitedHealth Group Inc (UNH), 3.6%.

Because of its wide circulation and relatively stable equity holdings, VTF is uniquely poised to capitalize on increasing demand in the medical industry. The fund’s holdings are primarily in Pharmaceuticals, 44.30%; Health Care Equipment, 15.30%; Biotechnology, 14.60%; and Managed Heath Care, 8.20. It also has additional holdings in healthcare services and life sciences tools and services.

The fund’s year-end 2011 expense ratio was .19%, 88% lower than the expense ratio of other funds with similar holdings. In my view, this fund offers low fees, a chance for capital appreciation and only modest risk for the loss of principal. It should do well as healthcare demand increases.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my ETF Trader service. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/