November was an underwhelming month for major stock market indexes such as the FTSE 100 and the S&P 500. For the month, these two indexes basically returned zilch.
There were plenty of areas of the market that performed well for investors in November, however. Here’s a look at an exchange-traded fund (ETF) in my portfolio that returned 8.4% for the month.
The best-performing sector in the S&P 500
The fund I want to highlight today is the Xtrackers MSCI World Health Care UCITS ETF (LSE: XDWH). It provides broad, global exposure to the Healthcare sector.
It’s doing really well at the moment because the Healthcare sector is on fire. In November, it was the best-performing sector in the S&P 500 index by a wide margin.
I got in at the right time
Now, I added this ETF to my SIPP back in late October (I highlighted this trade in an article on 1 November). The reason I did so was that I wanted to diversify away from technology/artificial intelligence stocks (which have done really well for me but now look a little frothy).
This move paid off. While tech stocks and major indexes were choppy last month, this ETF basically went up in a straight line.
Still worth a look?
Even after its recent gains, I still believe it’s worth considering. To my mind, an allocation to healthcare stocks is a great way to diversify a portfolio.
For a start, healthcare is a defensive sector that has different drivers to the tech sector. If tech stocks experience some short-term weakness (which I think is a real possibility), capital could flow into this sector.
Second, this ETF offers exposure to some brilliant companies. Right now the, top five holdings are:
- Eli Lilly – a pharma powerhouse having a lot of success with weight-loss drugs
- Johnson & Johnson – a healthcare giant that specialises in oncology and medical technology
- AbbVie – a lesser known healthcare company that specialises in immunology, oncology, and neuroscience
- UnitedHealth – the largest health insurance company in the world
- AstraZeneca – the largest pharma company in the FTSE 100
Note that with this ETF, an investor gets exposure to a lot of exciting healthcare innovations. Some examples here include weight-loss drugs, robotic surgery, and smart glasses.
I’ll be buying more
It’s worth pointing out that this ETF has a great long-term track record. Over the last 10 years, it has returned about 120% in USD terms.
Another attraction is its fee structure. Fees are low at just 0.25% per year (plus any platform charges).
Obviously, the fact that it’s focused on one sector adds risk. If the Healthcare sector was to experience some challenges in the years ahead, this ETF could underperform.
I see it as a great portfolio diversifier though. I plan to buy more ETF units for my portfolio in the months ahead.
