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Investing in the American Health Care Sector

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Learn more about investing ETFs and stocks in the trillion-dollar health care industry.

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Things you’ll learn in this guide:

  • Why health care is one of the largest industries in the U.S.
  • What some of the key companies in the health care industry are
  • How technology is changing the health care industry

Learn more about investing in the health care industry.

Health care is one of the most influential industries in the U.S. Learn how health care stocks can fit into a diversified portfolio.

What is the health care industry?

Americans collectively pay $3.4 trillion per year for health care and related services, according to industry data. By 2025, health care spending will represent almost 20% of the entire U.S. economy.

And no one is exempt. The average American, who has an employer-sponsored health insurance plan, spends $6,690 annually for coverage, according to Kaiser Family Foundation. For a family, the average annual cost is $18,764.

But what healthcare companies take, they can also give back in the form of jobs and high wages. The industry employs more people in the U.S. than any other. In 2017, the number of people working in health care surpassed the next two largest industries, manufacturing and retail.

The sector employs approximately 18 million people, according to the Centers for Disease Control, and 80% of them are women. These workers are paid relatively well, with median annual wages of nearly $65,000, nearly twice the national median income.

The health care industry is composed of public and private companies, non-profit organizations, and individuals that provide medical care and services (hospitals, etc.), produce and develop new medications and equipment (pharmaceutical and biotech companies, laboratory equipment manufacturers), offer insurance, and facilitate patient care.

What are the key health care stocks and companies?

The sector’s key players include large insurance companies such as UnitedHealth Group and Aetna, pharmaceutical companies including Merck and Johnson & Johnson, and many others, like medical distribution company McKesson, CVS Health, and pharmacy management company Express Scripts Holdings.

Many of these companies have also merged, creating larger companies with a wider reach. CVS and health insurer Aetna, for example, announced their intent to merge late last year, which would marry one of the country’s largest insurers with one of the largest drugstore chains.

Other mergers are in the works, too, such as the proposed acquisition of insurer Humana by Walmart.

What’s happening in the health care industry?

Improving health outcomes

Because of the constant churn of new drugs and treatments, the average American’s life expectancy has increased considerably over the years. A child born today can expect to live to around 79 years old, on average, according to the CDC.

For comparison: Babies born in 1950 had an average life expectancy of only around 68 years. And if you were born in 1900, it was around 47 years.

The health care industry also depends on innovation, and it would be difficult to list off all of the industry’s achievements and breakthroughs over the years. Some developments, however, include the creation and discovery of vaccines, anesthetics, antibiotics, radiologic imaging, and more.


Interestingly enough, there are non-health care companies on the periphery of the industry that are looking to get in and disrupt it. Among them are Amazon, Berkshire Hathaway, and JPMorgan, which together recently announced that they would attempt to team up to contain health care costs for their many employees.

New technology

Technology is proving to be a catalyst for change in almost every industry, and the healthcare sector is no exception. The improvements in health outcomes, patient experiences, and overall success rates are largely rooted in technological innovation within the healthcare field.

Some examples: Doctors and other healthcare professionals have access to massive amounts of computer data that can help them identify trends or patterns in populations. Wearable electronic devices are helping patients track their recoveries from illnesses. And hospitals are being outfitted with self-adjusting beds and robots to monitor patients.

Investing in health care companies

Think the health care sector is worth investing in? You can add health care companies to your portfolio, and there are a few ways to do it.

Investors in the U.S. can buy shares of stock in companies working in and around the industry on a publicly-traded exchange, or buy shares of a fund–such as an exchange-traded fund, or ETF–that offers exposure to those companies.

Investing in health care: single stocks

A single stock is just that, a share of ownership of a company. For example, investors can purchase shares of stock in companies like Bristol-Myers Squibb, Abbott Laboratories, Johnson & Johnson, Merck, and Procter & Gamble. *

Investing in healthcare ETFs (exchange-traded funds):

Exchange-traded funds (ETFs) are a basket of investments bundled into a fund that’s traded on an exchange like the Nasdaq or NYSE.

When you invest in a healthcare ETF, you are effectively buying small fractions of the companies within that ETF. The fraction depends on the weights stocks held in that fund. That fund owns the stocks within it and generally tracks an index–or group of investments that represent part of an industry or investment theme.

Healthcare ETFs vs stocks

ETFs have become popular in recent years as they give investors the opportunity to invest in the performance of a group of stocks without having to buy every single stock in the fund or handpicking single stocks.

Not only can this save time and research, ETFs can offer diversification, which many consider being an essential investing strategy.

Investing in health care on Stash

Want to invest in the American health care sector? You can check out the themed investments offered on Stash as well as single stocks.

*Listed investments currently available on Stash but not necessarily representative of all investments.
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