Image source: stevepb via Pixabay.

Roughly 10,000 American baby boomers will turn 65 today. The same goes for tomorrow. And the next day. And every single day after that for the next 19 years.

Given that the demand for healthcare increases as we grow older, the aging of the baby boomer generation is almost certain to ensure that expenditures on healthcare will continue to rise at a brisk pace over the coming years. In fact, the Center for Medicare and Medicaid Services, or CMS, is currently predicting that spending on healthcare will continue to grow at an average rate of 5.8% per year over the next decade, which, if true, should be far faster than the growth rate of the overall economy. 

With a trend like that in place, it can make sense to dedicate a portion of your investing portfolio to the healthcare sector, but what is the best way to play the trend without having to buy individual companies? One easy solution is to buy into an exchange-traded fund, or ETF, that owns a basket of healthcare stocks. Currently, the biggest and most popular ETF available today is the Health Care Select Sector SPDR ETF (NYSEMKT:XLV).

Lets take a closer look at what makes this ETF tick to see if it's a good choice for investors today.

Strong past performance
Investors in this ETF have enjoyed a terrific long-term ride over the past decade. This fund has cranked out an annualized return of 11% over that time period, putting it far ahead of the 7.8% return produced by the S&P 500. While that may sound like a relatively small difference, when those returns are compounded over time, the out-performance really starts to build up.

XLV Chart

Over a shorter time period, the result look even better, as the fund grew at a blistering 20.37% over the past five years, versus a still-impressive 14.28% return from the S&P 500.

Of course, just because this ETF has performed well in the past doesn't mean that it's destined for greatness into the future, so lets take a closer look at the details of this ETF to see if we can get a better sense of how it operates.

Here are some quick facts about the XLV that all of its investors should know:

Quick stats  
Category Specialty-Health
Expense Ratio 0.15%
Yield 1.39%
Total Assets $14.42 billion
Morningstar Rating 3 stars
Price / Prospective Earnings  20.82
Turnover Ratio 2.99%
Inception Year 1998

Source: Morningstar. 

A few numbers here are worth highlighting. First off, this fund is about as cheap as they come -- the expense ratio of just 0.15% makes this ETF a really cheap way to gain immediate exposure to the health sector. In addition, the fund's very low turnover ratio of only 2.99% means it's tax-efficient as well, showing that this ETF practices good old buy-and-hold investing that we Fools love so much. The XLV fund could be also offering investors a decent value proposition right now -- its price to prospective earnings ratio of only 20.82 is actually lower than the S&P 500's current ratio of 22. 

The only slight negative I can see here is that the fund's dividend yield of only 1.39% is a bit lower that I would expect, as the healthcare sector tends to be chock-full of companies offering big dividend payments. With the S&P 500 currently yielding 1.96%, this fund won't be kicking back as big of a cash payment as you can get from the market in general. 

Going big or go home
The ETF looks to be very well diversified, currently counting 57 different stocks among its holdings, and with a huge tilt toward the big boys in the sector.

Take a quick peak at its market capitulation break-out to see what I mean: 

Market Capitalization
Size% of Portfolio
Giant 61.51%
Large 32.38%
Medium 6.10%
Small 0%
Micro 0%

Source: Morningstar.

As you can see, this fund is heavily tilted toward the larger companies and offers no exposure to the smaller companies in the healthcare sector. In fact, the average company in the fund has a market capitalization of nearly $75 billion, which is simply huge.

This ETF is also fairly concentrated as its current top five holdings account for nearly 35% of the fund's total assets. While that may give some investors pause, I don't think there's much cause for concern -- that 35% includes incredibly well diversified blue-chip names like Johnson & Johnson, Pfizer, and Gilead Sciences

The Foolish bottom line
All in all, there is a lot to like about this fund. It offers broad-based exposure to a rising trend for a dirt-cheap price, so if you are looking for a way to ride the wave of an inevitable increase in spending on healthcare, the XLV looks to be a great way to do so. Of course, if you are interested in spicing up your healthcare-related portfolio returns a bit more, pairing this fund with a top biotech ETF might also be an even smarter way to go in the long term. 

Brian Feroldi owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool recommends Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.