Vanguard Health Care Fund Inv (16.65% for 29 years)

[EvrClrx311]

When I first started with my company and was researching Vanguard funds I noticed this one because it had the highest overall return going back 20+ years. At the time it was locked out, said it wasn't accepting new money from people not already invested. When our company merged with another larger one 5 years ago, suddenly this was added to the 50+ funds we had access to for our 401k. I put 10% of my retirement into it. It has beaten the overall market by a good deal since.

Since its inception in 1984 it has returned an average 16.65% a year.
YTD: 14.34%
1Year: 22.04%
5Year: 11.31%
10Year: 11.33%

Also its dividend yield was over 5% last year? At least it appears so based on the earnings I received.

I'm often weary of funds that have such huge returns over shorter periods of time. Thinking that if its returned such great numbers, its bound to have a few bad years ahead to bring it back down to reality... but this funds run has been going on for 29 years? I have no real comparison for this (Vanguard PRIMECAP Fund Investor is the only other one that even comes close at 13% since 1984). I'm still trying to understand it though - 29 years is more than a blimp, more than a bubble. Would appreciate any ones insight here.

Is there something about the health industry that will just continue on at this pace for the foreseeable future? Obviously healthcare costs are skyrocketing right now producing tons of revenue and money for the health care industry. But how has it been able to return such great numbers for three decades?

Due to the volatility I'd never put more than 10% of my 401k into it, but it is very tempting.

Someone that invested $12,000 into this in 1984... would have over a million today.

 

[JoeWras]

We dropped the minimum Admiral chunk in there last year. It promptly dove a few percent while the broader market was stable. Since then, however, it has done nicely. So, it has some challenging volatility. Beware.

This is my only significant sector fund, except for a smaller bit of REIT exposure. I did it because it is orthogonal to my industry that I currenlty w*rk in. I also wanted to take a bit of risk with some of our portfolio, without going down to individual stocks (been there, done that).

Also note: it has a yield of 1.8% which may be one reason these stocks are popular right now since bank rates are so low. Perhaps it could be sensitive to a change in interest rates in the future?

I can't tell you what it will do or why it has done so well except to say that healthcare is not a shrinking industry, and won't be for some time. We also seem to be drugging people up more and more. Despite what we personally feel about that, it is happening. The TV ads are working. The fund has 50% in the pharmaceutical industry.

 

[mickeyd]

Since its inception in 1984 it has returned an average 16.65% a year.
YTD: 14.34%
1Year: 22.04%
5Year: 11.31%
10Year: 11.33%

That's a sweet long term return for a niche fund. Too specialized for me, but glad you glammed onto it in time.

 

[gerrym51]

When I first started with my company and was researching Vanguard funds I noticed this one because it had the highest overall return going back 20+ years. At the time it was locked out, said it wasn't accepting new money from people not already invested. When our company merged with another larger one 5 years ago, suddenly this was added to the 50+ funds we had access to for our 401k. I put 10% of my retirement into it. It has beaten the overall market by a good deal since.

Since its inception in 1984 it has returned an average 16.65% a year.
YTD: 14.34%
1Year: 22.04%
5Year: 11.31%
10Year: 11.33%

Also its dividend yield was over 5% last year? At least it appears so based on the earnings I received.

I'm often weary of funds that have such huge returns over shorter periods of time. Thinking that if its returned such great numbers, its bound to have a few bad years ahead to bring it back down to reality... but this funds run has been going on for 29 years? I have no real comparison for this (Vanguard PRIMECAP Fund Investor is the only other one that even comes close at 13% since 1984). I'm still trying to understand it though - 29 years is more than a blimp, more than a bubble. Would appreciate any ones insight here.

Is there something about the health industry that will just continue on at this pace for the foreseeable future? Obviously healthcare costs are skyrocketing right now producing tons of revenue and money for the health care industry. But how has it been able to return such great numbers for three decades?

Due to the volatility I'd never put more than 10% of my 401k into it, but it is very tempting.

Someone that invested $12,000 into this in 1984... would have over a million today.

you don't want me to invest in it because that would guarantee it will crash.i am the kiss of death for stock investment

 

[samclem]

This fund has benefited from the increased US spending (as a percent of GDP) on healthcare over the last 30 years. Whether the ACA lives or not in its current form, there's little doubt that reigning in US healthcare spending has achieved a lot of public attention. So, I'd be wary of betting a disproportionate % of my portfolio on this sector fund right now.

On the other side of the argument is demography: We are getting older, and old people are sicker and need more healthcare. Still, profits (and therefore dividends and share appreciation) will largely be a function of ability/willingness to pay, not willingness to consume.

 

[EvrClrx311]

This fund has benefited from the increased US spending (as a percent of GDP) on healthcare over the last 30 years. Whether the ACA lives or not in its current form, there's little doubt that reigning in US healthcare spending has achieved a lot of public attention. So, I'd be wary of betting a disproportionate % of my portfolio on this sector fund right now.

On the other side of the argument is demography: We are getting older, and old people are sicker and need more healthcare. Still, profits (and therefore dividends and share appreciation) will largely be a function of ability/willingness to pay, not willingness to consume.

Great insight. Appreciate it.

 

[bondi688]

The long time manager of the fund also retired recently.

 

[Ed_The_Gypsy]

Like JoeWras, it is my only sector fund. The only other sector I invest in is oil and gas and pipelines. I figure both sectors are long-term growth industries. So far, it has panned out.

 

[SJ1_]

When I first started with my company and was researching Vanguard funds I noticed this one because it had the highest overall return going back 20+ years. At the time it was locked out, said it wasn't accepting new money from people not already invested. When our company merged with another larger one 5 years ago, suddenly this was added to the 50+ funds we had access to for our 401k. I put 10% of my retirement into it. It has beaten the overall market by a good deal since.

Since its inception in 1984 it has returned an average 16.65% a year.
YTD: 14.34%
1Year: 22.04%
5Year: 11.31%
10Year: 11.33%

Also its dividend yield was over 5% last year? At least it appears so based on the earnings I received.

I'm often weary of funds that have such huge returns over shorter periods of time. Thinking that if its returned such great numbers, its bound to have a few bad years ahead to bring it back down to reality... but this funds run has been going on for 29 years? I have no real comparison for this (Vanguard PRIMECAP Fund Investor is the only other one that even comes close at 13% since 1984). I'm still trying to understand it though - 29 years is more than a blimp, more than a bubble. Would appreciate any ones insight here.

Is there something about the health industry that will just continue on at this pace for the foreseeable future? Obviously healthcare costs are skyrocketing right now producing tons of revenue and money for the health care industry. But how has it been able to return such great numbers for three decades?

Due to the volatility I'd never put more than 10% of my 401k into it, but it is very tempting.

Someone that invested $12,000 into this in 1984... would have over a million today.

I finally got in to the Health Care fund around 1/2/2013. The min. use to be real high. a good friend of mine been in it for years. I also have a lot (for me) in STAR and Weslley.

 

[golfsalot]

I own the ETF version of VG Health Care (VHT). However, I recently bought Omega Healthcare Investors (OHI). Here is how it compares:

VGHCX: ytd (4/2) - 15.5; 1yr - 22.6; 3yr - 15.0; 5yr - 11.2; 10yr - 11.1
OHI: --- ytd (4/2) - 33.9; 1yr - 55.2; 3yr - 22.7; 5yr - 18.2; 10yr - 33.2

I plan to buy more at the next correction.

 

[travelover]

I own the ETF version of VG Health Care (VHT). However, I recently bought Omega Healthcare Investors (OHI). Here is how it compares:

VGHCX: ytd (4/2) - 15.5; 1yr - 22.6; 3yr - 15.0; 5yr - 11.2; 10yr - 11.1
OHI: --- ytd (4/2) - 33.9; 1yr - 55.2; 3yr - 22.7; 5yr - 18.2; 10yr - 33.2

I plan to buy more at the next correction.

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