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Healthy Companies, Healthy Profits for Your Portfolio

Selena Maranjian
January 18, 2013

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some health-care stocks to your portfolio, the iShares Dow Jones U.S. Health Care ETF (NYSE: IYH) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.47 %.

This ETF has performed  reasonably, beating the world market over the past three and five years, but slightly underperforming it over the past 10. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With a low turnover rate of 7% , this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

Why health care?
For starters, our planet's growing and aging population will keep demand rising for health-care products and services. On top of that, Obamacare is likely to usher more Americans into health coverage, delivering more consumers to companies treating them.

More than a handful of health-care companies  had strong performances over the past year. Celgene (NASDAQ: CELG) gained 35%. It sports five-year average  annual revenue growth rates of more than 30%, and its three-year average earnings growth is 36%.