Which Is the Better Healthcare ETF: First Trust's High-Conviction FBT or Vanguard's Low-Cost VHT?
2026-07-23 12:15
•Sara Appino •The Motley Fool
•••• ••••• Axe Capital view
Healthcare ETFs: High Conviction vs. Broad Stability
Comparing focused biotech ETF FBT with Vanguard's diversified healthcare VHT for South African investors.
Biotech-focused ETFs like First Trust's FBT deliver eye-catching returns but come with steep volatility and higher fees, which might unsettle anyone less battle-hardened. Their portfolio is tight—just about 30 stocks—making swings more pronounced. On the flip side, Vanguard's VHT offers broad coverage of over 400 healthcare companies, cushioning shocks and charging a fraction of the fees. While FBT may entice those willing to ride biotech waves, VHT fits better as a steady anchor in a South African portfolio, especially when the rand’s choppy moves can add another layer of risk. Long-term, VHT’s steady dividends and diversification align well with blue-chip JSE plays like Aspen or Life Healthcare, which benefit from global healthcare trends. But if biotech breakthroughs drive returns beyond expectations, FBT might edge ahead. For now, I’d watch FBT but lean into VHT for durable exposure. this is just my opinion and not financial advice
Buy Vanguard VHT for a cost-effective, diversified healthcare play with steady dividends. Watch FBT for opportunistic biotech spikes but avoid committing too heavily.
- FBT
- VHT
- USD/ZAR
- Biotech sector volatility can cause sharp losses in FBT
- Rand weakness can erode offshore healthcare returns for local investors
6/10
First Trust NYSE Arca Biotechnology Index Fund (FBT) offers concentrated exposure to 30 biotech stocks with 51.6% 1-year returns but higher volatility and a 0.55% expense ratio. Vanguard Health Care ETF (VHT) provides broader diversification across 400+ healthcare companies with lower costs (0.09% expense ratio) and dividend yield, making it better for long-term stability. FBT suits investors with high risk tolerance and biotech conviction, while VHT is recommended for those seeking healthcare as a portfolio stabilizer.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: Sara Appino
Categories: Rates, Equities, Capital Returns, Healthcare
Tickers: FBT, VHT, LLY, JNJ, ABBV
Sentiment: Positive - FBT shows strong 1-year performance (51.6%) but carries significantly higher expense ratio (0.55%), concentrated portfolio risk with only 30 holdings, and higher volatility (max drawdown of 29.9%). Suitable only for risk-tolerant investors with specific biotech conviction. VHT is recommended as the stronger long-term choice due to its very low expense ratio (0.09%), broad diversification across 400+ healthcare companies, dividend yield (1.6%), lower volatility (max drawdown of 17.7%), and larger AUM ($20.4B), making it ideal for stability-focused investors.
Keywords: healthcare ETF, biotechnology, expense ratio, diversification, volatility, dividend yield, pharmaceutical, medical devices
Insights:
- FBT: Neutral: FBT shows strong 1-year performance (51.6%) but carries significantly higher expense ratio (0.55%), concentrated portfolio risk with only 30 holdings, and higher volatility (max drawdown of 29.9%). Suitable only for risk-tolerant investors with specific biotech conviction.
- VHT: Positive: VHT is recommended as the stronger long-term choice due to its very low expense ratio (0.09%), broad diversification across 400+ healthcare companies, dividend yield (1.6%), lower volatility (max drawdown of 17.7%), and larger AUM ($20.4B), making it ideal for stability-focused investors.
- LLY: Positive: Largest holding in VHT at 14.19%, representing a major pharmaceutical company benefiting from strong biopharma deal activity in oncology, obesity, and immunology sectors.