Investors choosing between iShares Global Healthcare ETF (NYSEMKT:IXJ) and State Street SPDR S&P Biotech ETF (NYSEMKT:XBI) must weigh the high-growth potential of specialized U.S. biotech against a more stable, dividend-paying global healthcare portfolio.
Healthcare investors often choose between the stability of established global giants and the high-growth potential of emerging biotechnology. This comparison examines how the broad, international reach of the iShares fund differs from the concentrated, equal-weighted U.S. focus found in the State Street portfolio.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the close of trading on August 6.
The State Street SPDR S&P Biotech ETF is slightly more affordable with a 0.35% expense ratio. However, the iShares Global Healthcare ETF offers a significantly higher payout, with a yield gap of 1.05 percentage points over its peer.
Performance & risk comparison
What’s inside
The iShares Global Healthcare ETF holds 110 positions, providing exposure to global equities within the pharmaceutical, biotechnology, and medical device industries. Its largest positions include Eli Lilly and Co (NYSE:LLY) at 10.3%, Johnson & Johnson (NYSE:JNJ) at 7%, and Abbvie Inc (NYSE:ABBV) at 5%. The fund is designed for investors seeking broad sector coverage with less volatility than niche sub-sectors. It was launched in 2001. iShares Global Healthcare ETF has paid $1.44 per share over the trailing 12 months, which on its recent ~$101.3 share price works out to a 1.4% yield.
The State Street SPDR S&P Biotech ETF tracks the S&P Biotechnology Select Industry Index using a representative sampling technique across 153 holdings. Its top holdings include Apogee Therapeutics Inc (NASDAQ:APGE) at 1.7%, Oruka Therapeutics Inc (NASDAQ:ORKA) at 1.5%, and Dianthus Therapeutics Inc (NASDAQ:DNTH) at 1.4%. Because it uses a modified equal-weighting system, it provides significant exposure to small- and mid-cap growth stocks rather than just industry titans. It was launched in 2006. State Street SPDR S&P Biotech ETF has paid $0.57 per share over the trailing 12 months, which on its recent ~$154.5 share price works out to a 0.4% yield.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy?
It’s no secret that healthcare has been on a good run the past year. As a sector it is up around 30% the past 52 weeks. Both these ETFs are good ways to add this sector-specific exposure to your portfolio, but they have distinct differences investors should take into account to decide which one to buy.
IXJ, the iShares Global Healthcare ETF, is quite concentrated in large cap stocks. The portfolio has 81% of its holdings in large caps, mostly value stocks, with 18% in mid caps and the balance in small caps. It is also somewhat skewed toward its top 10 holdings, with the cohort accounting for about 47% of the portfolio. The fund holds about three quarters of its assets in U.S.-domiciled businesses, followed by Switzerland and the United Kingdom at 10% and 5% of the portfolio, respectively.
XBI, the State Street SPDR S&P Biotech ETF, is like a mirror image, with 81% of its portfolio in small cap stocks, 14% in mid caps and the rest in large caps. It has far less of its portfolio dedicated to its top 10, with just 14% of the holdings allocated to them. Interestingly, 97% of holdings are U.S. companies, reflecting the robust developmental and research stage biotech sector in the country.
For most investors, what really matters is performance. Here, XBI wins out, thanks to its focus on small caps, which are having their best year since 1991. In addition to the superior 1-year return noted above, XBI beats IXJ in the year-to-date (20.7% versus 3.9%), 3-year (20.6% to 6.8%), and 10-year (9.2% versus 8.2%) time-frames. The iShares ETF, IXJ is the better performer over the past five years, with an annualized return of 4.6% compared to 3.7% for the State Street fund, XBI.
While XBI’s small cap focus brings more risk, as seen in the maximum drawdown table above, long-term investors should care mostly about performance. There, XBI proves its mettle as the healthcare-related ETF to buy in 2026.
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Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Eli Lilly. The Motley Fool recommends Johnson & Johnson and SPDR Series Trust – SPDR S&P Biotech ETF. The Motley Fool has a disclosure policy.
iShares Global Healthcare ETF vs State Street SPDR Biotech ETF. Which Healthcare-Focused Fund Will Bring You Profits in 2026 and Beyond? was originally published by The Motley Fool
