Health Care Sector Investing

[Spanky]

Out of curiosity, what percentage, if any, of your portfolio is allocated to the health care sector (other than that from the S&P 500 or Wilshire 5000)? This sector seems very attractive in return and risk. Back in 2008, the health care sector was down a little bit over 20% compared to the nearly 40% decline of the the S&P 500.

I heard that over weighting any particular sector is not prudent. It's difficult to ignore as the return of this sector has been remarkable for a long time, however. The Vanguard Healthcare fund, by far, has been the best performance fund that I have for the past 15 years.

 

[Ed_The_Gypsy]

10% to VGHAX. Very happy with it and will keep it.

The only other non-diversified sector I am in is oil and gas (heavier than 10%, but I am figuring to pull back in a few years).

 

[Dash man]

We're overweighted at about 20 percent in a single health care stock in the form of options from my DW's work. As soon as she retires and exercises these we'll get into a better balance.

 

[Spanky]

We're overweighted at about 20 percent in a single health care stock in the form of options from my DW's work. As soon as she retires and exercises these we'll get into a better balance.

20% is significant. I only have .6% tied up with company stock.

 

[roninop]

8% in VGHAX here as well, owned it about 15 years. This is the only sector fund we own. Agreed, it's been a great performer.

 

[Dash man]

20% is significant. I only have .6% tied up with company stock.

Yes it is significant. But that's what happens when stock options are issued and the stock price goes up! She can't exercise them until they vest, and the government will take 40 percent or so, but it has definitely helped our finances!

 

[FIREd]

We have about 20% of our net worth tied to a singe health care stock (DW's employer). We have additional exposure to the sector though our dividend-paying equity portfolio.

 

[MRG]

Yes it is significant. But that's what happens when stock options are issued and the stock price goes up! She can't exercise them until they vest, and the government will take 40 percent or so, but it has definitely helped our finances!

High quality problem to have. Company stock options made us a lot of income. I had to put one batch in the WSC file, as I foolishly didn't exercise them when the stock was at an all time high. They went underwater, never came back up till after the grant expired.
Best wishes,
MRG

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[CaliforniaMan]

With our aging population, if any sector would be expected to increase its share of GDP, it should be healthcare. I also keep a little over 6% of my portfolio in VG healthcare funds over and above what is in the index funds. In addition to the population issue, it seems to me that this area is one of the most promising for technological advancement, and creating new products for people to want more from healthcare than they expected in the past.

 

[Dash man]

High quality problem to have. Company stock options made us a lot of income. I had to put one batch in the WSC file, as I foolishly didn't exercise them when the stock was at an all time high. They went underwater, never came back up till after the grant expired.
Best wishes,
MRG

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I'm sorry you had a bad experience. There's always a risk the stock price will fall, but fortunately we've saved and invested in other ways to not rely on these options for our future. Hopefully you did the same. But if we get to the vesting date with the price where it is now or higher, we'll be dancing!

 

[redduck]

VGHAX; 7.58% I think this might have been the first mutual fund I ever bought--but not this Admiral share version, but the beginner's Health Care version.

 

[MRG]

I'm sorry you had a bad experience. There's always a risk the stock price will fall, but fortunately we've saved and invested in other ways to not rely on these options for our future. Hopefully you did the same. But if we get to the vesting date with the price where it is now or higher, we'll be dancing!

Oh we did ok, just wish I could have a do over. At one time Megacorp stock was 60% of our net worth, not by my doing, they were handing it out like candy in a retirement account. My only option at that time was to quit. I didn't, but when they allowed me the chance to roll it out, didn't take long to make that decision. Today I still hold some, it's done well. Hope yours stays up and you make a bunch.
Best wishes,
MRG

 

[kgtest]

15% in VHT. This was one area I extended my risk this year and I am happy I did. It's up 7.78% on the year. Winning.

 

[Koolau]

There are certainly plenty of theories suggesting overweighting in HC sector (again population, etc.) After I read an article which told the (then) current weighting just in the S&P500, I chose not to dive into a special fund that specialized in such equities. In hindsight, that may have been a mistake. Still, I followed my "plan" and have relatively few complaints about how it has made my ER dream a reality. To each his own and YMMV, etc.

 

[Turboslacker]

Great sector choice

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[2soon2tell]

I own PRHSX and BBH biotech etf. Both have done extremely well.

 

[Russman]

Currently, I have 10% invested in VGHCX. Been pretty pleased with the performance so far. I don't really see anything wrong with investing a portion of your portfolio in a given sector, as long as you aren't committing too large of a chunk of your portfolio to one single sector. I think Healthcare has a pretty bright long term future anyway, considering the reliance of the boomer generation and future generations on medication and healthcare needs. Think of it as selective diversification.

 

[rescueme]

We have held VGHAX for over two decades (a/o yesterday, up 11.12% YTD).

It's the only sector fund we hold.

 

[RobLJ]

Healthcaresector

I have about 6% of portfolio in FBIOX and FSPSH and going back to mid-1995 started making small monthly allocations in the former. I've been selling chunks of Biotech over the last 3 years, once or twice a year, as it went through its moonshot rise. Gains are now more than the total position.
I will sell another chunk, probably soon, when/if it hits another milestone. Two of my core funds are also over-allocated to health care--
The thesis was&is that we saw a series of scientific breakthroughs in the biotech sector, including genomics, and that large healthcare would buy out the promising drugs to replenish lost patents.
I'm over-allocated here and in energy, but I do think biotech is getting pricey so I won't be putting new money in until it adjusts downwards in price. I'm in the taking profits stage which also was the case in 2000 and 2007. YMMV.

 

[braumeister]

A bit over 8% for me, in two funds, an ETF, and two individual stocks.
That's my comfort limit; any higher allocation to one sector would make it hard for me to sleep.

 

[samclem]

Nope, I'm not taking steps to make a sector bet on healthcare. It's true that the population is aging, but it's also true that "reigning in healthcare costs" is on a lot of minds these days, and that could spell trouble (for health care stocks, not for the country). Everyone knows the population is aging, everyone knows people need health care, so I'm pretty sure all this is already factored into the prices of those stocks.
The % of GDP we presently spend on health care is among the highest in the world, I don't know if that's a tree that can grow much taller. I think a lot of the future spending will be for LTC: Warehousing seniors and hiring low-skill workers to empty bedpans isn't a formula for a high-tech, high margin business.