It’s difficult to get the best of both worlds in mutual funds. Some products might be great for opportunistically chasing growth but just as quickly peel back when investors go risk-off, for instance. Others might hold up well in pullbacks but fail to participate in broad-market rips.
Health care funds, however, can exhibit defensive characteristics and deliver market-beating performance over long bull stretches.
The defensive nature of health care stocks comes from the fact that consumers will generally continue to buy these goods and services that they need, no matter what the economy is doing. The long-term growth aspect is supported by the combination of an aging population and advances in medical science and technology.
For evidence of the short- and long-term dual play for health care funds, look no further than the actual numbers. For the year through Oct. 6, 2020 – a decidedly tumultuous period – the average health care mutual fund had outperformed the S&P 500, 10.9% to 5.5%. Over the past decade, meanwhile, health care funds have averaged 15.5% returns annually, which is more than 2 percentage points better than the broader market.
Where can you find this 1-2 sector punch? Read on as we examine five of the best health care mutual funds for the long run.