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Investors often rely on the healthcare sector to safeguard their investments. This is because demand for healthcare services does not vary much with market conditions. Also, investments in the sector provide sufficient protection to the capital invested.
Many pharmaceutical companies also offer regular dividends. Companies that consistently pay out dividends are financially stable and generate consistent cash flows, irrespective of market conditions. Mutual funds are perfect choices for investors looking to enter this sector since they possess the advantages of wide diversification and analytical insight.
As a matter of fact, the U.S. healthcare sector is anticipated to experience a major revolution in the days to come. The coronavirus pandemic is likely to shape up the future for the space.
In such circumstances, investing in healthcare mutual funds seems prudent. However, choosing the right mutual funds for your portfolio can be quite tricky. To that end, let us find out which of the two funds discussed below is better.
PGIM Jennison Health Sciences Fund- Class A PHLAX
The fund aims for long-term capital appreciation. This non-diversified fund invests majority of its assets in equity and equity-related securities of companies within the health sciences sector, such as pharmaceutical companies, biotechnology companies, medical device manufacturers, healthcare service providers and health maintenance organizations.
Further, the fund also invests in other companies that derive at least half of their revenues or profits from operations in the healthcare sector.
This Sector-Health product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the three and five-year benchmarks are 11.5% and 7.1%, respectively. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.
PGIM Jennison Health Sciences Fund- Class A, as of the last filing, allocates its assets in the top two major groups — Large Growth and Foreign Bond. Further, as of the last filing, Sarepta Therapeutics Inc, Unitedhealth Group Inc. and Biomarin Pharmaceutical were the top holdings for PHLAX.
This product, with a Zacks Rank #1 (Strong Buy), was incepted in June 1999 and is managed by PGIM. PHLAX carries an expense ratio of 1.15% and requires a minimal initial investment of $1,000.
Fidelity Select Medical Technology and Devices Portfolio FSMEX
This fund aims for capital growth. It invests majority of its assets in companies that are engaged in activities such as research, manufacturing, supply and sale of medical equipment and related technologies. The fund also invests in companies providing information technology services to health care providers. The non-diversified fund invests in common stocks and in U.S. and non-U.S. issuers.
This Sector-Health product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 20.9% over the three-year and 19.9% of the five-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.
The Fidelity Select Medical Technology and Devices Portfolio fund, as of the last filing, allocates its assets in top two major groups — Large Growth and High Yield Bond. Further, as of the last filing, Thermo Fisher Scientific, Becton Dickinson & Company and Boston Scientific Corp were the top holdings for FSMEX.
This product with a Zacks Mutual Fund Rank #2 (Buy) was incepted in April 1998 and is managed by Fidelity. FSMEX carries an expense ratio of 0.71% and requires a minimal initial investment of $0.
While both FSMEX and PHLAX are recommended buys, upon having a closer look, we find that the former is a clear winner. PHLAX is way more expensive compared to FSMEX (it has a minimum initial investment $1,000 compared to FSMEX’s $0). Further, its administrative and other operating expenses are higher than FSMEX. So, one should clearly bet on FSMEX for higher returns on low investments.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.