The Perfect Storm for Retirees

Today’s retirees are unlike any other retirees in history: They’re living longer, and many of them want to spend more in retirement than previous generations. At the same time, the fear of running out of money is incredibly common, and for good reason.

The bargain made decades ago in the transition from defined benefit pension plans to the modern 401(k) gave workers control over their savings but also transferred longevity risk from the employer to the worker. As such, these days few retirees can rely on a significant pension and must make their savings last for decades. This may be even more difficult considering that we could see persistently low interest rates, higher inflation and market volatility in the coming years.

The result? Today’s retirees could face a perfect storm, and they may have to use different financial planning strategies than retirees of the past.

Low Interest Rates

The Federal Reserve recently announced that it would maintain the target federal funds rate (the benchmark for most interest rates) at a range of 0% to 0.25%. The Fed cut rates down to this level in March of last year in hopes of combating the crippling economic effects of the pandemic, and it may not raise them for years. Interest rates are expected to stay where they are until 2023. Even when they rise, they could stay relatively low for some time.

As the U.S. government borrowings increase dramatically, the motivation for holding rates down increases. This combination works in favor of immense government borrowing, but for retirees it creates an intrinsic tax in the form of persistently low rates paid on savings. Borrowers love low rates as much as savers detest them. This truth is very much in play today. This poses a problem to retirees who want to earn a reasonable rate of return while minimizing their investment risk.

The Potential for Inflation

Coupled with persistently low interest rates, retirees could face increased inflation in the coming years. Government spending increased significantly due to COVID, with the CARES Act costing $2.2 trillion and the American Rescue Plan Act costing $1.9 trillion alone. The Federal Reserve has said that there is potential for “transient” inflation in the coming months and that it would allow inflation to rise above 2% for some time. While most experts don’t think it’s likely that we’ll return to the high inflation rates of the 1970s, even a normal inflation rate is cause for concern among those nearing and in retirement. Over the course of a long retirement, inflation can eat away at savings significantly.

Consider this: After 20 years with a 2% inflation rate (the Fed’s “target” interest rate), $1 million would only have the buying power of $672,971.

The combination of low interest rates and higher inflation may drive many retirees to take on more market risk than they normally would to account for that.

Market Risk

Those nearing retirement and recently retired can expose themselves to sequence-of-returns risk if they take on too much market risk. This is when a portfolio experiences a significant drop in value while the owner is withdrawing funds, owing to nothing more than unlucky timing. This risk is actuated by the timing of the age of the individual retiree and when they plan to retire, not something anyone usually times around market levels or investment performance but rather around lifestyle or even health factors. As a result, often the portfolio cannot fully recover as the market bounces back, due to the burden of regular withdrawals, and may be left significantly reduced.

Today’s retirees live in an uncertain world with an uncertain market. No one could have predicted the pandemic or its economic effects, and similarly, no one can predict where the market will be next year, in five years or in 10 years. While younger investors can ride out periods of volatility, retirees who are relying on their investments for income may have significantly lower risk tolerance and need to rethink their retirement investment strategy.

Is There a Solution?

This leaves many retirees in a perfect storm. They need to make their savings last longer than any previous generation, but with interest rates at historic lows, they may feel pressured to subject their savings to too much market risk in hopes of earning a reasonable rate of return. The most fundamental step to take is committing to regularized, frequent reviews with your financial adviser. Depending on portfolio size and complexity, this is most often quarterly, but should be no less frequent than every six months. This time investment keeps retirees attuned to shifts in the portfolio that will sustain them for decades to come.

Finally, consider the breadth of options available to your adviser, or on the retail platform you use if you are self-managed. Sometimes having the right tool is everything in getting the job done.  Often advisers have a greater breadth of options available that can more than offset their cost. Remember there are options beyond equities. The best advisers have access to guaranteed income insurance products, market linked certificates of deposits and other “structured assets.” This basket of solutions can provide downside protection ranging from a buffer of say 10%-20% all the way to being fully guaranteed by the issuing insurer or commercial bank. Even within the markets themselves, there are asset managers who create stock and bond portfolios that focus on a specific downside target first, emphasizing downside protection above growth right from the start.

Although market risk remains, it’s true that by focusing on acceptable downside first, those portfolios are likely to weather downturns better even if they do surrender some upside as an offset. And while none of these approaches is perfect, they can work as a component to offset a portion of the market risk retirees probably need to endure for decades to come.

The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation. Securities offered through Kalos Capital Inc. and Investment Advisory Services offered through Kalos Management Inc., both at 11525 Park Woods Circle, Alpharetta GA 30005, (678) 356-1100. SouthPark Capital is not an affiliate or subsidiary of Kalos Capital or Kalos Management.

CEO, SouthPark Capital

George Terlizzi has worked in business for more than 25 years as an entrepreneur, consultant, dealmaker and executive for early and mid-stage companies. He has substantial concentrations in finance, technology, consulting and numerous forms of transaction work. Today George advises wealth clients individually and sets the strategic vision for SouthPark Capital. George’s insatiable curiosity, action-oriented approach, and broad-ranging interests are invaluable to those he advises.

Source: kiplinger.com

Dear Penny: I Have $700K, but Spending Gives Me Panic Attacks

Dear Penny,

I’m a 61-year-old woman with $700,000 saved for retirement. I own my own home (with a mortgage), and I have more than five months of daily expenses in a cash account. I have a few investment accounts in addition to the cash and I basically follow a 60/20/20 budget for my after-tax and after-retirement dollars.  

Why can’t I stop freaking out about money? I save for home repairs, and then freak out when I write the check. I save for a new car and then freak out when it’s time to buy it. I HAVE THE MONEY.

I’m not poor, but I have been cash poor in the past. I have always saved for retirement, but I can’t stop freaking out. And by freaking out, I mean literally days of heart-pounding panic attacks where Xanax is my only friend.  

How do other people handle this? 

-L.

Dear L.,

Fear is healthy to a degree. It’s what makes us wear our seatbelts and avoid dark alleys at night. Some level of money-related fear is also a good thing. If you didn’t worry there was a chance you’d run out of it, why wouldn’t you spend every dollar?

But there’s a big difference between healthy fear and the serious anxiety that you’re experiencing. An advice columnist is no substitute for mental health treatment. Whatever you do, it’s essential that you discuss your anxiety with a professional.

I wish I could tell you that $700,000 is more than enough for you. But that wouldn’t be an honest answer. There’s no way I can tell you with certainty that any level of savings is a guarantee you’ll never run out of money. Even billionaires wind up in bankruptcy court. But there’s plenty you can do to reduce the risk of whatever outcome you fear.

Financial health isn’t just about any one number. That $700,000 could be more than enough if you live in a low-cost area and plan to work for several more years. But if you live in Manhattan, you want to retire next year and people in your family frequently live past 100, it could leave you woefully short. Context is what matters here. The amount you have saved is meaningless without knowing your lifestyle, goals and concerns.

What I’m wondering is how much actual planning you’ve done beyond just saving. Do you have an age in mind for when you want to retire? Have you thought about when you’ll take Social Security? Do you plan to stay in your home and, if so, will you be mortgage-free by the time you retire?

All of this may seem overwhelming to think about when money already causes you so much stress. But worrying constantly plays a mind trick on you. You spend so much brain space and energy on worrying that it can feel like you’re actually taking action.

I want you to do what seems counterintuitive and think about the absolute worst-case scenarios. But I don’t want you doing this alone. I’d urge you to meet with a financial adviser, since you have the means to do so.

Write down your biggest fears so that you can discuss them together. Are you afraid of outliving your savings? Are you worried the market will crash right as you’re about to retire? Or that health care costs will eat up your retirement budget?

A financial adviser doesn’t have any special sourcery that can guarantee none of these things will happen. What they can do, though, is help you reduce the risk of those worst-case scenarios. If you’re worried about running out of money, they can help you plan how much you’ll safely be able to withdraw from retirement accounts and when you should take Social Security. Of course they can’t stop a stock market crash from happening, but they can make sure your investments are safely allocated based on your goals.

It sounds like you’re someone with a low risk tolerance, which means you probably want to invest conservatively. Perhaps a good investment for you would be to pay off that mortgage using a chunk of that savings. Will it be scary to fork over that much money at once? Of course, especially since the interest savings will probably pale compared to your investment returns. But if you can sleep more soundly knowing that what’s probably your biggest expense is taken care of, it could be worth it. I’m not saying that’s something you should absolutely do, but it’s worth discussing with your financial pro.

I suspect that when you think realistically about your worst-case scenarios, you’ll realize things aren’t as dire as you imagined. Suppose for some reason you had to quit working tomorrow. Your plans for retirement would probably change significantly. But at the same time, you wouldn’t be left without food or a home.

You say you’ve been cash poor in the past. Yet you overcame that and even managed to save for retirement when you didn’t have much money. You aren’t doomed to repeat your past.

I think if you do what’s scary and face your fears head-on — with the help of both a financial and a mental health professional — you can reduce the anxiety you feel about money. That’s not to say you’ll never worry about money again. But you can get to a place where fears about money aren’t dominating your life.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].

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Source: thepennyhoarder.com

How do annuities work?

A mother and her daughter play together.

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Many people know about 401(k)s and IRAs, but there are many other options for retirement planning and wealth-building. Find out more about annuities and whether this option might be right for you.

What is an annuity?

Annuities are a type of insurance product, but instead of insuring yourself or your property against potential future losses, annuities let you insure income. Specifically, they help ensure that you will receive an agreed-upon amount of money periodically at some point in the future, which makes them a popular vehicle for retirement planning.

Annuities are a type of income insurance product that helps ensure that you will receive an agreed-upon amount of money periodically in the future, which makes them a popular vehicle for retirement planning.

How annuities work

The basic concept behind annuities is that you purchase a product now. You pay for it either in a lump sum or via agreed-upon payments—sometimes in the form of insurance premiums over a period of years.

In exchange, at some point in the future, you begin to receive payments on your annuity. Those payments typically come periodically, such as monthly, quarterly or annually. Depending on the annuity product you purchase, you can receive those payments for a certain period of time or for the rest of your life once the annuity payout begins.

You can generally expect to get back more in annuity payments than you pay into the product. That’s why they’re considered an investment. The reason for this is that your annuity purchase price or premium payments are put into a pot with all the other payments being made by annuity customers for that product or provider. Those funds are invested, and the earnings over time result in a profit for you and the insurance provider.

The main types of annuities

How much you can earn, when and how it pays out and the risk associated with your investment all depend on what type of annuity you buy. The types of annuities are summarized below to help you determine if any might be a good choice for you.

Deferred annuities versus immediate annuities

The first major decision to make when purchasing an annuity is whether you want a deferred or immediate annuity. Deferred annuities begin paying out at some agreed-upon point in the future, making them potential vehicles for retirement planning. Immediate annuities start paying out immediately, which might make them a better option if you’re close to retirement or want to ensure a certain level of income in the near future.

Three categories of annuities

Once you decide when you want your payouts to begin, you’ll need to pick a more specific type of annuity to invest in. Both immediate and deferred annuities have three major categories which are outlined below.

3 types of annuities

1. Fixed annuities

Fixed annuities are those that pay out an agreed-upon, guaranteed amount each time you receive income. This can be a good option if you want a stable income you can count on. The downside of fixed annuities is that the lower risk comes with lower potential reward from a returns perspective.

2. Fixed indexed annuities

Fixed indexed annuities guarantee at least a minimum amount paid out, so they can help provide stability for your budget. But part of your returns is tied to the performance of a market index. Market indexes include options such as the Dow Jones or S&P 500. If you have a fixed indexed annuity, then you might earn more payout than the minimum if the market performs well in a given period.

3. Variable annuities

Variable annuities are tied to a group of mutual funds. The amount of your annuity payouts depends on the performance of those funds. That can mean greater long-term reward, but it also comes with more risk than either of the other two categories of annuities.

Can you withdraw your money early?

You may be able to withdraw money from an annuity early if you find that you need your investment back or can’t wait until payouts are scheduled to begin. But this can be a costly move.

First, if you take money out of a retirement account, including some annuities, before reaching retirement age, the IRS may levy a 10% penalty. You’ll also have to pay any applicable taxes on the income.

For the purposes of annuities, penalties and taxes are only paid on the amount you earned on the investment. You’re not taxed on the amount you paid into the annuity because you were already taxed on that amount when you earned it the first time.

In some cases, the IRS waives the 10% penalty. Such cases include the total disability of the annuity owner or the annuity owner taking early withdrawals to pay for qualified education expenses.

How are annuities taxed?

Taxes on annuities can be complex, so it’s important to consult a tax professional to understand what your tax burden might be. Typically, payments you make toward an annuity are not made with pre-tax dollars. That means the money you pay into an annuity is already taxed, and you won’t pay income tax on it again in the future.

But you might owe taxes on any earnings you make from the investment. That means when you begin to receive payouts, you will have to report the income and calculate how much of it is taxable.

Is an annuity right for you?

Deciding whether any investment is right for you is an individual matter. You must look at your current financial state, your goals for the future and the level of risk you’re comfortable with. Since annuities are based on contracts, they’re typically considered less risky than stock market investments, but no investment is 100% guaranteed. Consider talking to a financial adviser to understand what investment and retirement planning options might be right for you.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Are Financial Advisors Worth it for Medium Income Families?

Financial advice is mostly regarded as a service needed by the affluent in society. The argument is that with more money, one needs guidance on how and when to invest. However true that might be, it’s good to consider that even people with low to medium incomes have to contend with college fees, mortgages and eventual retirement among other financial obligations. So,

How much does Financial Advice Cost?

The input that financial advisors bring to the table does not come cheap. The usual fee ranges from 1% to 2% of a client’s portfolio, these kinds of charges works best for people with established wealth and assets north of $250,000. To cater to the middle class, financial planners charge hourly fees depending on the complexity of the service required.

Financial Advisors for Middle ClassFinancial Advisors for Middle Class

It’s hard to quantify financial advice because it is difficult to standardize its pricing. Some advisors charge a minimum or an initial set up fee that can be as low as $70 for budgetary advice.

A sound financial or investment plan can go for up to $400 hourly. There are firms or planners who charge a fee for ongoing service, this can be as low as $20 monthly. Others will charge a retainer and an annual fee of $600.

Middle-income earners can also take advantage of Digital Advisors; these are websites that offer financial advice at a fee. Routine monetary questions are answered for a couple of dollars. On the other hand, queries that require a great deal of effort is charged hourly at between $150 and $250 per hour.

Importance of Financial Advisors

While middle-income earners may not have vast amounts to plan for, it doesn’t make their financial decisions less sophisticated. They have to manage debts, decide on new purchases and plan on new investments. All this has to be done within the time of probably working two jobs or racking up overtime to boost the take home. This is where financial advisors come in.

  1. Steering a financial plan

They help you keep track of how and where your money is being invested. It is within their expertise to predict how such investments may change with time. They get to come up with changes that can be done to your portfolio so as to position yourself better.

With complete knowledge to your current expenses and income, your advisor can keep you from overspending on a given investment. This allows clients to free more of their income to go towards saving for future expenditures like college fees or a new car.

The investment market is riddled with new and never-ending opportunities. Some are good but not all amount to profits. A financial advisor helps in sifting through the buzz to keep clients off bad investments like pyramid schemes that plague the middle class.

  1. Protecting Client’s Investments

Every investment comes with a risk. Fidelity postulates that a safe investment is one that strikes a balance between different classes of assets. These include bonds, cash, mutual funds, and stocks. Advisors help clients to pick the right mix of products, this, in turn, diversifies their portfolio to minimize individual risks.

  1. Ensuring Investments Follow Regulations

When it comes to financial matters, it’s not easy to keep abreast of all the dos and don’ts contained in the fine print. Advisors help in navigating through the rules and regulations that govern different aspects of investments.

Apart from ensuring the client’s money is safe, the rules also lay out the expected taxation on different ventures. A planner will assist in choosing the most tax-efficient financial products.

Some financial matters may input from not only a financial planner but also attorneys. Without a qualified advisor to bring this to a client’s knowledge, they may find themselves in the murky waters of litigations all in the name of healthy finances.

In conclusion, everyone needs some financial advice at one point or another. It may be in the form of long-term rapport or independent sessions. This requires you to incur some costs. As a medium-income family, you may not afford to have an on-going relationship with a financial advisor but you can get some much-needed advice that can be accessed in sessions either online or in person.

Source: creditabsolute.com

Do I Qualify for the National Mortgage Settlement?

Last updated on February 10th, 2012

In case you haven’t heard by now, the so-called “National Mortgage Settlement” was finalized today.

It’s the largest multi-state settlement since the Tobacco Settlement back in 1998, related to robosigning allegations that took place over the past several years.

Essentially, some of the nation’s largest loan servicers routinely signed off on foreclosure documents without doing their due diligence, and/or without the presence of a notary.

It will provide more than $25 billion in assistance to homeowners, participating states and the federal government.

For the record, all 50 states participated except for lonely old Oklahoma.

The offending parties in the National Mortgage Settlement include:

– Ally/GMAC
– Bank of America
– Citi
– JPMorgan Chase
– Wells Fargo

These are the nation’s five largest mortgage loan servicers.

Benefits will be provided to both borrowers whose loans are owned by the settling banks as well as to borrowers whose loans they service.

In other words, your mortgage may have been originated by another company and sold to one of these companies to be serviced. So be sure to check your loan documents if you think you may be eligible.

Where the Settlement Money Will Go

The bulk of the money, at least $10 billion, will go toward principal balance reductions. In other words, those who hold underwater mortgages will see their balances drop to get them above water.

But the assistance will only be directed toward those who are either delinquent or at imminent risk of default as of the date of the settlement.

The principal reduction will likely be facilitated via a loan modification, so borrowers will ideally end up with a smaller loan balance and a lower mortgage rate, which will certainly make mortgage payments much more affordable.

State attorneys general believe principal reductions will prove beneficial, and as a result, will be employed by other mortgage lenders not involved in the settlement.

Another $7 billion or more will be used for short sales and transitional services, forbearance of principal for unemployed borrowers, anti-blight programs, and benefits for service members forced to sell their homes at a loss as a result of a “Permanent Change in Station” order.

Loan servicers will also have at least another $3 billion at their fingertips to provide refinancing to borrowers who are current, but underwater on their mortgages.

These homeowners will be able to take advantage of the record low mortgage rates that were previously out of reach due to loan-to-value ratio restraints.

Additionally, $1.5 billion will be distributed to roughly 750,000 borrowers who have already lost their homes to foreclosure.

The states involved will also receive immediate payments of roughly $3.5 billion to help fund consumer protection and state foreclosure protection programs.

How and When Can You Get Help?

If you think you qualify for assistance, you can contact the offending mortgage servicer directly, although they should be contacting you…

For borrowers who lost their homes between January 1, 2008 and December 31, 2011, a claim form should be sent to you for one of those shiny checks.

You can also contact your individual Attorney General’s office to check eligibility, or to provide a current address assuming you moved and/or have been foreclosed on.

Unfortunately, relief won’t be immediate under the settlement. Over the next 30-60 days, settlement negotiators will be selecting an administrator to oversee the program.

And over the next six to nine months, this administrator will work with attorneys general and loan servicers to identify relief recipients.

It is expected to take three years to execute the entire settlement, so patience is a virtue here.

Who is Left Out of the National Mortgage Settlement?

Borrowers with Fannie Mae and Freddie Mac owned mortgages. And those with FHA loans.

This is more than half of the homeowners with mortgages in the United States.

So quite a few borrowers are missing out. But they can still get assistance via HARP 2.0, even if they are severely underwater. Or via the Broad Based Refinancing Plan currently in the works.

Additionally, those that have positive home equity likely won’t see any relief from this settlement.

Essentially, those that paid down their mortgages, or came up with a reasonable down payment, won’t qualify for assistance under this settlement.

While it seems like they’re losing out, they aren’t. This settlement is about shoddy foreclosure practices, so those that weren’t affected obviously wouldn’t receive any benefit.

However, they may receive the indirect benefit of a healthier housing market and higher home prices if the settlement works as it should.

It’s worth noting that the banks involved are still accountable for claims that may arise out of any other wrongdoings committed during the lead up to the mortgage crisis.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

10 Best Health Care ETFs of 2021

Technological innovation is everywhere you look, especially in health care. New technologies are making simple work of some of the most pressing medical conditions known to man.

Even the COVID-19 pandemic has been proof that the health care sector is evolving, with vaccines being created and marketed within a year of the outbreak of the novel coronavirus.

Of course, the health care industry is massive. Well-researched investments in a variety of health care stocks and bonds have proven to be lucrative moves. But what if you don’t have the time or expertise to do the research it takes to make individual health care investments?

That’s where health care exchange-traded funds (ETFs) come in.

Best Health Care ETFs

Health care ETFs are funds that pool money from a large group of investors and then invest in health care stocks and other health care-focused investments.

As with any investment vehicle, not all health care ETFs are created equal. Some will come with higher costs than others, and returns on your investment will vary wildly from one fund to another.

With so many options available, it can be difficult to pin down which ETFs you should invest in. Here are some of the best options on the market today:

1. Vanguard Health Care Index Fund ETF (VHT)

  • Expense Ratio: 0.10%
  • One-Year Return: 29.89%
  • Five-Year Annualized Return: 15.10%
  • Dividend Yield: 1.42%
  • Morningstar Rating: 4 out of 5 stars
  • Top Holdings Include: Johnson & Johnson (JNJ), UnitedHealth Group (UHC), Abbott Laboratories (ABT), Thermo Fisher Scientific (TOM), Pfizer (PFE)
  • Years Up Since Inception: 14
  • Years Down Since Inception: 2

Vanguard is one of the best-known wealth managers on Wall Street. So, you can rest assured that when you invest in a health care ETF or any other Vanguard fund, your money is in good hands.

The Vanguard Health Care Index Fund ETF is focused on investing in companies that sell medical products, services, equipment, and technologies using a highly diversified portfolio.

As a Vanguard fund, the VHT comes with an incredibly low expense ratio and a strong history of providing compelling returns for investors.

Pro tip: Have you considered hiring a financial advisor but don’t want to pay the high fees? Enter Vanguard Personal Advisor Services. When you sign up, you’ll work closely with an advisor to create a custom investment plan that can help you meet your financial goals.


2. Health Care Select Sector SPDR Fund (XLV)

  • Expense Ratio: 0.12%
  • One-Year Return: 23.75%
  • Five-Year Annualized Return: 13.15%
  • Dividend Yield: 1.49%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Abbott Laboratories (ABT), AbbVie (ABBV), Pfizer (PFE)
  • Years Up Since Inception: 17
  • Years Down Since Inception: 5

The Health Care Select Sector SPDR Fund is offered by State Street Global Advisors, one of the largest asset management companies on Wall Street. The firm behind this health care ETF is one with pedigree.

As a passively-managed fund, the XLV was designed to track the returns of the Health Care Select Sector Index, which provides a representation of the health care sector of the S&P 500.

As a result, the XLV ETF provides diversified exposure to some of the largest U.S. health care companies. The fund provides compelling returns and relatively strong dividends for the health care industry.

As is the case with most funds provided by State Street Global Advisors, this ETF comes with incredibly low fees, far below the industry average.


3. ARK Genomic Revolution ETF (ARKG)

  • Expense Ratio: 0.75%
  • One-Year Return: 174.19%
  • Five-Year Annualized Return: 43.78%
  • Dividend Yield: 0.93%
  • Morningstar Rating: 5 out of 5 stars
  • Top Holdings Include: Teladoc Health (TDOC), Twist Bioscience (TWST), Pacific Biosciences of California (PACB), Exact Sciences (EXAS), Regeneron Pharmaceuticals (REGN)
  • Years Up Since Inception: 4
  • Years Down Since Inception: 2

The ARK Genomic Revolution ETF is offered by ARK Invest, yet another highly trusted fund manager on Wall Street.

The ETF is designed to provide diversified exposure to companies that are working to extend the length and improve the quality of life for consumers with debilitating conditions through technological and scientific innovations in genomics.

Essentially, this fund invests in companies focused on the editing of genomes, or base units within DNA, to solve some of the most pressing problems in medical science.

With genomics being a relatively new concept that’s showing incredible promise in the field of medicine, companies in the space are experiencing compelling growth, making the ARKG ETF one of the best performers on this list.

However, it’s also worth mentioning that this is one of the higher-volatility ETFs on the list, which adds to the risk of investing.


4. Fidelity MSCI Health Care Index ETF (FHLC)

  • Expense Ratio: 0.08%
  • One-Year Return: 29.76%
  • Five-Year Annualized Return: 15.11%
  • Dividend Yield: 1.46%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Abbott Laboratories (ABT), AbbVie (ABBV), Pfizer (PFE)
  • Years Up Since Inception: 6
  • Years Down Since Inception: 1

Fidelity is a massive company that has grown to become a household name thanks to its insurance division. It’s also one of the biggest and most well-trusted fund managers on Wall Street.

The company’s MSCI Health Care Index ETF has become a prime option for retail investors who want to gain diversified exposure to the U.S. health care industry.

The ETF was designed to track the MSCI USA IMI Health Care Index, which represents the universe of investable large-cap, mid-cap, and small-cap U.S. equities in the health care sector.

As can be expected from the vast majority of Fidelity funds, the FHLC is a top performer on the market with a relatively low expense ratio.


5. iShares Nasdaq Biotechnology ETF (IBB)

  • Expense Ratio: 0.46%
  • One-Year Return: 38.14%
  • Five-Year Annualized Return: 13.38%
  • Dividend Yield: 0.19%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Amgen (AMGN), Gilead Sciences (GILD), Illumina (ILMN), Moderna (MRNA), Vertex Pharmaceuticals (VRTX)
  • Years Up Since Inception: 15
  • Years Down Since Inception: 4

iShares has become yet another leading fund manager on Wall Street, and the firm’s Nasdaq Biotechnology ETF is yet another strong option to consider if you’re looking for diversified exposure to the U.S. health care sector.

The fund was specifically designed to provide exposure to the biotechnology and pharmaceuticals subsectors of the health care industry. It does so by investing in biotechnology and pharmaceutical companies listed on the Nasdaq.

As an iShares fund, investors will enjoy market-leading returns through a diversified portfolio of investments selected by some of the most trusted professionals on Wall Street.

The IBB expense ratio is around the industry-average ETF expense ratio of 0.44%, according to The Wall Street Journal, but the fund’s expenses are justified by its outsize returns.


6. iShares U.S. Healthcare Providers ETF (IHF)

  • Expense Ratio: 0.42%
  • One-Year Return: 31.67%
  • Five-Year Annualized Return: 16.5%
  • Dividend Yield: 0.54%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: UnitedHealth Group (UNH), CVS Health (CVS), Anthem (ANTM), HCA Healthcare (HCA), Teladoc Health (TDOC)
  • Years Up Since Inception: 13
  • Years Down Since Inception: 1

The iShares U.S. Healthcare Providers ETF is designed to provide exposure to a different area of the health care industry.

Instead of investing in companies that create treatments and therapeutic options, the IHF fund invests in companies that provide health insurance, specialized care, and diagnostics services.

To do so, the ETF invests in an index designed to track large U.S. health care providers.

The fund comes with an expense ratio that’s slightly lower than the average for ETFs while providing performance that’s hard to ignore. While IHF isn’t the best dividend payer, the iShares U.S. Healthcare Providers ETF does provide compelling returns, making it a strong pick for any health care investor’s portfolio.


7. iShares U.S. Medical Devices ETF (IHI)

  • Expense Ratio: 0.42%
  • One-Year Return: 36.77%
  • Five-Year Annualized Return: 23.60%
  • Dividend Yield: 0.50%
  • Morningstar Rating: 5 out of 5 stars
  • Top Holdings Include: Abbott Laboratories (ABT), Thermo Fisher Scientific (TMO), Medtronic (MDT), Danaher (DHR), Stryker (SYK)
  • Years Up Since Inception: 12
  • Years Down Since Inception: 2

The iShares U.S. Medical Devices ETF gives investors access to a diversified portfolio of stocks in the medical device subsector.

Investments in the company center around products like glucose monitoring devices, robotics-assisted surgery technology, and devices that improve clinical outcomes for back surgery patients.

In order to provide this exposure, the iShares U.S. Medical Devices ETF tracks an index composed of domestic medical devices companies.

While the expense ratio on the fund is about average, its performance over the past 10 years has been anything but, with annualized returns throughout the period of more than 18%, earning it a perfect five-star rating from Morningstar.


8. iShares Global Healthcare ETF (IXJ)

  • Expense Ratio: 0.46%
  • One-Year Return: 19.93%
  • Five-Year Annualized Return: 11.51%
  • Dividend Yield: 1.27%
  • Morningstar Rating: 2 out of 5 stars
  • Top Holdings Include: Johnson & Johnson (JNJ), UnitedHealth Group (UNH), Roche Holdings (ROG), Novartis (NOVN), Abbott Laboratories (ABT)
  • Years Up Since Inception: 12
  • Years Down Since Inception: 3

If you’re not interested in choosing subsectors of the health care industry to invest in and would rather have widespread exposure to all sectors of health care in all economies, whether developed or emerging, the iShares Global Healthcare ETF is a strong pick.

The ETF comes with an expense ratio that’s nearly in line with the industry average, but its holdings are some of the most diverse in the health care ETF space.

Moreover, the IXJ ETF is known to produce relatively reliable gains year after year, closing in the green in 12 of the past 15 years.


9. Invesco S&P 500 Equal Weight Health Care ETF (RYH)

  • Expense Ratio: 0.40%
  • One-Year Return: 27.93%
  • Five-Year Annualized Return: 13.81%
  • Dividend Yield: 0.51%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Illumina (ILMN), Eli Lilly (LLY), Alexion Pharmaceuticals (ALXN), Abiomed (ABMD), Catalent (CTLT)
  • Years Up Since Inception: 11
  • Years Down Since Inception: 3

Founded in 1935, Invesco is a fund manager that’s been around the block more than a few times. It’s all but expected that the firm would make an appearance in just about any “top ETF” list.

Based on the S&P 500 Equal Weight Health Care Index, the ETF provides diversified exposure to all health care stocks listed on the S&P 500. That means when you purchase shares of RYH, you’ll be tapping into a wide range of health care stocks.

In fact, the S&P 500 represents more than 70% of the market cap of the entire U.S. stock market, which is why it’s often used as a benchmark. So, by tapping into every health care stock listed on the index, you’ll be tapping into some of the highest quality U.S. companies in the space.


10. SPDR S&P Biotech ETF (XBI)

  • Expense Ratio: 0.35%
  • One-Year Return: 66.31%
  • Five-Year Annualized Return: 22.56%
  • Dividend Yield: 0.2%
  • Morningstar Rating: 3 out of 5 stars
  • Top Holdings Include: Vir Biotechnology (VIR), Novavax (NVAX), Ligand Pharmaceuticals (LGND), Agios Pharmaceuticals (AGIO), BioCryst Pharmaceuticals (BCRX)
  • Years Up Since Inception: 11
  • Years Down Since Inception: 3

Another fund offered up by State Street Advisors, the SPDR S&P 500 Biotech ETF is an impressive option. While it’s the last on this list, it’s also been the top performer on this list over the past year and the third-best performer in terms of annualized returns.

The XBI ETF was designed to track the S&P Biotechnology Select Industry Index, an index designed to track the biotechnology subsector of the health care industry. As a result, an investment in this fund means you’ll be investing in all biotechnology companies listed on the S&P 500.

Not to mention, while returns on the XBIO have been impressive, to say the least, the expense ratio on the fund is below the industry average.

While the SPDR S&P Biotech ETF isn’t the biggest income earner on this list, it is a strong play with a relatively consistent history of producing gains far beyond those seen across the wider market.


Final Word

Health care ETFs are a great option for investors who are interested in using their investments to create some good in the world.

Not only are the top ETFs in this space known for producing incredible returns, it feels good knowing that your investment dollars are helping companies produce medications, devices, and services designed to improve quality of life and extend the length of the lives of your fellow man.

Although investing in health care ETFs is a promising way to go about building your wealth in the stock market, it’s important to remember not all ETFs are created equal. So, it’s best to do your research, looking into key stats surrounding historic performance and expenses before diving into any fund.

Nonetheless, the ETFs listed above are some of the strongest performers in the health care industry and make a great first watchlist for the newcomer to health care ETF investing.

Source: moneycrashers.com