What To Know About Investing in the Healthcare Sector

While much of the U.S. and the world economies have been somewhat stagnant, there is one area that continues to grow, even in the face of newly implemented regulations, and that’s healthcare. Healthcare-related companies are still working to figure out the implications of the Affordable Care Act, but with the aging population in the U.S., it’s an area of strength in the economy.


That makes the healthcare sector a great place to invest, but there are some things to know before putting your money here.

Below are key things to keep in mind as you explore the possibilities to invest in healthcare successfully.

Know the Broad Categories

There are two very broad categories healthcare stocks will fall into, and you can invest in one or both, depending on your goals, strategies, and preferences. The first type includes equipment, manufacturers and service providers.

Even within this larger group, investors will see there are sub-categories so they might opt to invest in a medical supply company like Stryker or go with the care providers, such as hospitals.

The next category includes pharmaceutical and biotech companies, and these tend to be more common places for investors to go, particularly if they want to invest in innovation.

Keep An Eye on Mergers and Acquisitions

According to Firmex in the “Mid-Market M&A Report: Riding Out the Downturn,” healthcare is one of the few areas of the economy poised for growth, and their panel of experts don’t expect that to change anytime soon. They see upward trends in the sector, but there are also changes in healthcare that could lead to new mergers and acquisitions.

If investors are vigilant about looking out for these situations, they may find excellent investment opportunities.

Think About Funds

When investing in the healthcare sector, an investor might opt to either look at the larger well-known, and somewhat diversified companies in the industry or they might try to go with risky smaller pharmaceutical and biotech options. While the route to take is dependent on the investor’s risk tolerance among other things, the best choice can actually be to go for a broad fund.

These health care funds can be a good option for someone who’s fairly risk-averse or just starting to invest in the healthcare industry.

A great option can be the Vanguard Health Care exchange-traded fund, as an example.

Watch the Political Landscape

As well as monitoring potential mergers and acquisitions, when investing in the healthcare industry in any way, it’s also a good idea to keep an eye on the political landscape. The U.S. healthcare industry could go through significant changes depending on who wins the presidential election, and it could move from being very privatized to more along the lines of a universal system.

There are also political moves impacting not only actual care and insurers, but the pharmaceutical area of health care as companies are raising prices, but facing political pushback as a result.

The health care industry presents excellent investment opportunities if you’re willing to do your research and focus on current and possible changes in the associated industries.