Making Money Alert
ETF Talk: Health Care Offers Portfolio Elixir
12/07/2011
Even though the market has climbed in the past few days, keep in mind that the macro-economic problems hindering equities in recent months have yet to be solved. Of course, when we see the markets jump as they did earlier this week, we typically want to ride the wave. But you must act with caution. One way to do so is by investing in one of the few sectors that show resiliency in the face of economic uncertainty. The health care sector is one such example, since it has continued to rise amid concerns about European debt, flagging growth in China
As a result, an exchange-traded fund (ETF) that you may want to consider buying is the Health Care Select Sector SPDR (XLV). It seeks performance, before expenses, that will closely match the returns and characteristics of the S&P Health Care Select Sector Index.
XLV has performed extraordinarily well in the face of continuing headlines about a host of economic risks. Year-to-date, XLV is up 6.8%. For the past 12 months, the fund has jumped 8.8%. In fact, certain pharmaceutical ETFs have soared even higher than XLV. As a baby boomer, I am very much aware that the health-care sector is an industry that has an ever-growing consumer base as the U.S.
One thing that I think we all should be able to agree upon is that the health-care industry always will have people to serve. You may be able to avoid going overboard with gift purchases during the holiday season to keep from spending money that you should be saving, but you probably always go to the doctor when you are very sick. You can cut back elsewhere, but it would be unwise to forgo prescribed medication or medical tests, regardless of how the economy is performing. These reasons help to explain why the health-care sector outperforms the broad market during economic slowdowns.
As always, if you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my ETF Trader service. In addition, remember that I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.