Investing in healthcare stocks

Learn the benefits and risks of investing in pharmaceuticals, biotech, health insurance and more.

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The healthcare sector is large and complex. Australian investors must be wary of governmental regulations and political shifts before investing in healthcare stocks.

What are healthcare stocks?

Healthcare stocks belong to the healthcare sector of the stock market — one of 11 sectors defined by the Global Industry Classification Standard. Companies within the healthcare sector provide medical services, including insurance, medical equipment and pharmaceuticals.

The healthcare sector is large, with healthcare-related spending accounting for approximately 10% of Australia's GDP in 2018. The healthcare sector is also complex, given government and professional licensing regulations, research costs and the rapid evolution of the medical field.

What subcategories does it include?

The healthcare sector can be further divided into the following major industries:

  • Healthcare facilities. These include hospitals, clinics, laboratories, mental health facilities and nursing homes.
  • Health insurance. Companies responsible for providing and underwriting health insurance policies also belong to the healthcare sector.
  • Medical equipment. Medical equipment providers design and manufacture equipment used across the sector, from CT scanners to surgical gloves.
  • Pharmaceuticals. Biotech firms and major pharmaceutical firms work to research, develop and distribute generic and name-brand drugs.

How to invest in the healthcare sector

There are two ways to invest in the healthcare sector in Australia: individual stocks or exchange-traded funds (ETFs). Individual stocks offer targeted investment opportunities but have limited market exposure. Sector-tracking ETFs are more diverse and less risky than individual stocks but are accompanied by expense ratios.

Before you can invest, you’ll need a brokerage account in Australia. Here’s how the investment process works:

  1. Pick a platform. Online brokerages in Australia are plentiful, so conduct your own research to find the platform best suited to your investment goals.
  2. Open an account. If you opt for a web-based brokerage account, you can complete the application process online.
  3. Fund your account. Before you can purchase securities, fund your account with an external transfer.
  4. Select your securities. Search for stocks and ETFs by sector using your platform’s research tools.
  5. Place an order. Once you’ve found a security you’d like to purchase, indicate how many you’d like to buy and submit your order.
  6. Monitor your investments. Log in to your brokerage account to track your investments.

What stocks are in the healthcare sector?

What ETFs track the healthcare sector?

Popular ETFs in the healthcare sector include:

How is the healthcare sector performing?

The graph below tracks the Health Care Select Sector SPDR Fund (XLV). Tracking ETF performance is one way to measure how the sector as a whole is doing.

Why invest in healthcare stocks?

Healthcare is a human necessity. This means the demand for healthcare services typically remains unchanged, regardless of how other industries rise and fall. Investing in well-established healthcare stocks can provide a cushion of security in an aggressive growth portfolio.

Healthcare stocks also offer Australian investors the opportunity to fund medical research. As the field continues to expand, investors can support research efforts seeking to cure disease.

What unique risks does the healthcare sector face?

The medical field is complicated, and if you don’t understand what a company does or how it operates, you may want to think twice before investing.

Government legislation is another major consideration for healthcare investors. Sweeping shifts in policy — the Affordable Care Act in the United States, for example — have the power to trigger significant volatility in this sector. And global drug approval authorities have the power to make or break fledgling pharmaceutical companies. If you choose to invest in this sector, keep an eye on political shifts and regulatory changes.

Compare stock trading platforms

To purchase stocks or ETFs, you'll need a brokerage account in Australia. Use this table to compare your options and find the right fit.

Name Product Standard brokerage fee Inactivity fee Markets International
eToro (global stocks)
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
IG Share Trading
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Superhero share trading
ASX shares, US shares
Earn up to 15,000 Qantas frequent flyer points when you transfer an exisiting balance or trade. Offer valid for all new and existing Superhero members until 28 February.
Pay zero brokerage on US stocks and all ETFs and just $5 (flat fee) to trade Australian shares from your mobile or desktop.
ThinkMarkets Share Trading
ASX shares
Limited-time offer: Get 10 free ASX trades ($0 brokerage) when you open a share trading account with ThinkMarkets before 31 December 2021(T&Cs apply). $8 flat fee brokerage for CHESS Sponsored ASX stocks (HIN ownership), plus free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
ASX shares, mFunds, ETFs
Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until 31 Dec 2021, when you join Bell Direct. T&Cs apply.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
Saxo Capital Markets (Classic account)
ASX shares, Global shares, ETFs
Access 19,000+ stocks on 40+ exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
CommSec Share Trading Account
$0 for ASX shares, US$25 for global
ASX shares, Global shares, Options trading, ETFs
Trade with Australia's largest online stockbroking firm.
Enjoy fast, simple and affordable trades, with market leading research and broker recommendations all in one platform
CMC Markets Invest
ASX shares, Global shares, mFunds, ETFs
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
SelfWealth (Basic account)
ASX shares, US shares
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.

Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Bottom line

The healthcare sector offers the opportunity for profit but carries its own unique set of risks. Whether or not this sector belongs in your portfolio depends on your risk tolerance and investment goals. Explore your brokerage account options across multiple trading platforms for the account best suited to your needs.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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