VanEck Healthcare TruSector ETF (TRUH)

TRUH is an exchange-traded fund that holds healthcare companies—drugmakers, hospitals, medical-device producers, and health insurers. It is one fund that you trade like a stock, and it owns a slice of dozens of firms that research, make, and deliver healthcare.

The healthcare sector is simple to understand but has a lot going on underneath. It includes the drug companies that invent and sell medicines. It includes the hospitals and clinics that treat patients. It includes the makers of devices and equipment—from pacemakers to X-ray machines. It includes companies that manage health insurance and organize care. And it includes distributors and pharmacies. All of these firms make money from the fact that people get sick and want to get better.

TRUH is a fund that holds the biggest healthcare companies in the United States, weighted by how much they are worth. The largest holdings are usually the biggest pharmaceutical companies and health insurers. Below them are mid-size drug companies, medical-device makers, and operators of hospitals. Because the fund holds shares of all these types of companies, you are betting on healthcare as a whole, not on any one drug or any one type of business.

The fund costs about 0.10% per year to own—that is one tenth of one percent. You can buy it or sell it at any time during the trading day, just like a stock. The fund reinvests any dividends it receives from the companies it holds, and it rebalances every three months to keep the weightings in line with the index.

Healthcare companies tend to do well when the economy is strong and people can afford to buy medicines and get treatment. They also do well when new drugs are approved or when aging populations need more medical care. Bad things for the sector are price controls on drugs, lawsuits and liability, expensive clinical trials that fail, and regulatory changes. During recessions, people skip optional procedures but still take their medications, so healthcare is less cyclical than other sectors—it holds up better when times are hard.

One thing to watch is drug pricing and patents. When a major drug’s patent expires, other companies can make cheaper copies, and sales fall sharply. When a company invents a new treatment no one else has, it can charge a lot. Governments around the world are pushing to lower drug prices, which is a long-term pressure on the biggest pharmaceutical firms. Medical devices and health insurance have their own challenges. Device makers compete on innovation and cost. Insurers try to collect premiums but avoid expensive patients, and they face pressure when medical costs rise faster than the prices they charge.

To understand healthcare stocks, read the 10-K filing from a pharmaceutical company or a hospital operator. These show how much revenue came from which drugs or services, how much was spent on research, and what lawsuits or regulatory issues are outstanding. Listen to quarterly earnings calls to hear management talk about clinical trials, upcoming drug approvals, and patient demand. Follow FDA approvals and clinical trial results, because these move drug stocks. And watch what governments do around the world on drug pricing—a major price regulation can hit drug company stocks immediately. TRUH lets you invest in all of this without picking individual companies.