Basics of Investing in Healthcare for Beginners

Did you know that there are 784,626 companies in the United States healthcare sector? Investing in healthcare is hard to avoid because of the wide range of options available.

Americans need healthcare services each year which is why healthcare does so well in the stock market. An investor looking to spend money on healthcare stocks is a wise one, but how can you get started?

Keep reading to learn the basics of investing in healthcare.

Types of Healthcare Stocks

Investing in healthcare is often done through a variety of stocks. The healthcare sector is a broad range of industries and each has its own degree of volatility.

The performance of these stocks depends on government regulation, scientific and technological breakthroughs, demographics, and reimbursement patterns.

The six general agreed-upon healthcare subsectors have their own characteristics. These are the types of healthcare stocks to invest in:

  • Pharmaceutical
  • Biotech
  • Medical equipment
  • Sales and distribution
  • Insurance
  • Healthcare facilities

There are also specific healthcare companies to invest in. Healthcare facilities include clinics, hospitals, labs, psychiatric facilities, physician offices, and nursing homes. HCA Healthcare is one of the major players.

The problem with this type of investment is that they have had past profitability issues. In particular, it was hit hard by the COVID-19 pandemic.

Managed Healthcare

One of the top trends in healthcare investment is managed healthcare, aka insurance companies. This is the field that provides a company with health insurance policies.

Managed healthcare companies have steady returns because the sector is dominated by these five big companies:

  • UnitedHealth Group Inc.
  • Anthem Inc.
  • Aetna Inc.
  • Humana Inc.
  • Cigna Corp.

These are some of the best healthcare stocks to invest in because they don’t face a lot of disruptions from new competitors. The creation of new laws and changes in healthcare laws may cause ripples in this market.

How to Invest in Healthcare

Adding healthcare stocks to your investment portfolio is a great idea, but is now a good time to invest in healthcare? This post has more information on current healthcare investment trends.

The most popular ways to invest in healthcare stocks are through individual stocks, mutual funds, and ETFs, and REITs.

Individual Stocks

On stock exchanges, there are global healthcare stocks to choose from. Determine which subsector fits within your portfolio and do research on which company offers the best return on investment.

Mutual Funds and ETFs

A lot of healthcare sector mutual funds come in the form of index funds. Mutual funds and ETFs are actively managed meaning the manager chooses the individual stocks based on performance and other factors.


Real estate investment trusts (REITs) are publicly traded funds that often specialize in healthcare facilities. This is a more indirect way to invest but you benefit from investing in real estate and healthcare simultaneously.

Is Investing in Healthcare Right for You?

Everyone uses health services at some point in their lives so it is a solid form of investment. Avid investors tend to gravitate towards companies they know so why not invest in healthcare stocks?

The healthcare industry is difficult for an investor to avoid as multiple stocks see a return on investment. If you want to diversify your portfolio, investing in healthcare will prove to be beneficial.

Looking for more articles like this? Check out the other posts on our blog.


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