One of the keys to successful long-term investing is to focus on companies that are likely to have staying power. You can use sector investing to help you identify potential stocks.
Combined with our app and Safety Score, you can drill down to find companies that fit your criteria. The healthcare sector has a lot of promise, besides offering access to various companies.
Healthcare is a relatively safe sector to consider. The average Safety Score of the sector is 68. And, as you can see, there are some industries within the healthcare sector (like medical distribution) that have very high safety scores. When you dig into these industries, you are likely to find some gems that can provide you with solid companies to add to your portfolio.
But what makes the healthcare sector such an attractive choice?
One of the biggest reasons the healthcare sector can be a solid addition to a portfolio is the fact that people always need services. On top of that, the boomer population is expected to need a number of medical services as they age.
There is a large demand for healthcare services, no matter the ages of those involved. At some point everyone gets sick. People have accidents. Preventative care is being pushed more than ever. As a result, it’s not surprising that the healthcare sector has a lot of long-term potential.
Of course, even though the healthcare sector has potential, there are some drawbacks to be aware of.
First of all, the political climate surrounding healthcare is in flux. No one is quite sure what is happening with the Affordable Care Act and the exchanges. Executive orders, and promises by Congressional leaders to continue the effort to repeal mean that the future is uncertain in some areas.
At some point, though, the instability in the system will have to be addressed. But things might be shaky for a while. Some of the procedures covered by insurance and other industries can be affected by uncertainty in the insurance system.
It’s important to pay attention and make decisions based on the long-term no matter what you’re investing in.
Another way to invest in the healthcare sector and gain exposure to real estate at the same time is to look into real estate investment trusts (REITs).
REITs are collections of properties that share some characteristics. If you invest in healthcare REITs, you might have exposure to medical office complexes, hospitals, assisted living facilities, and home healthcare businesses. If it has to healthcare services, you have ownership is some of the properties.
For some investors, this is a good way to kill two birds with one stone. You can invest in the healthcare sector, which is very promising long-term. Plus, you also get to add a little real estate to your portfolio, which is important if you want to diversify a little bit.
REITs are also attractive to many investors because they pay dividends. The downside, though, is that when the real estate market crashes, you end up seeing some losses. It’s important to consider the long-term and invest for value. You want to ride out the downturns and avoid locking in losses.
Carefully consider what you invest in and the types of properties that are in the REITs. You want to make sure they are likely to stand the test of time.
If you are worried about picking individual stocks, you can invest in healthcare ETFs. These funds trade like stocks, but include exposure to a lot of different healthcare companies. You might be able to get a wide swath of the healthcare market with the help of the ETF.
This can remove some of the pressure of picking stocks, although the Safety Score can help you find choices that are likely to be a decent value over time.
I personally don’t like choosing individual stocks, so ETF investing works well for me. If that’s the case for you, don’t try to force yourself to choose stocks. Instead, look for a healthcare ETF that meets your portfolio needs.
Healthcare isn’t for everyone, but it can be a good way to add a little diversity to your portfolio in an area that has a good chance to grow in the next 20 years.