Top 5 Healthcare Mutual Funds (Feb. 2011)

When markets are passing through choppy waters, investors often rely on the healthcare sector to safeguard their investments. This is because the demand for healthcare services does not vary with market conditions, making them a safe haven during difficult times. Many pharma companies also generate regular dividends, which go a long way in softening the blow dealt by plummeting share prices. Mutual funds are the perfect choice for investors looking to enter this sector since they possess the advantages of wide diversification and analytical insight.

Below we will share with you 5 top rated health mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.

Eaton Vance Worldwide Health Sciences A (ETHSX) invests at least 80% of its assets in health science companies and related firms. The fund invests in both domestic and foreign securities, investing in instruments from at least three different countries at any given time. It invests in companies regardless of their market capitalization. The health mutual fund returned 10.47% in the last one year period.

The health mutual fund has a minimum initial investment of $1,000 and an expense ratio of 2.07% compared to a category average of 1.77%.

Fidelity Select Medical Delivery (FSHCX) seeks capital growth. The fund invests heavily in firms involved in health care delivery. This includes companies which own or manage hospitals, nursing homes and health maintenance organizations. The health mutual fund has a ten year annualized return of 10.53%.

Andrew Hatem is the fund manager and has managed this health mutual fund since 2009.

Vanguard Health Care Index (VHCIX) invests primarily in healthcare stocks and seeks to match the performance of the MSCI U.S. Investable Market Health Care 25/50 index. This index consists of stocks of companies of all sizes from this sector. This includes firms which produce healthcare equipment and supply related services. The health mutual fund returned 6.19% in the last one year period.

The health mutual fund has an expense ratio of 0.24% compared to a category average of 1.77%.

Putnam Global Health Care A (PHSTX) seeks long-term capital growth. The fund invests primarily in companies from the health care sector across the globe. It focuses on acquiring common stocks of large and mid-cap companies, but may also invest in smaller firms. The health mutual fund has a three year annualized return of 10.53%.

As of December 2010, this health mutual fund held 66 issues, with 7.87% of its total assets invested in Pfizer Inc.

Rydex Biotechnology (RYOIX) invests substantially in equity securities and derivatives issued by domestic biotechnology companies. It is non-diversified and seeks long-term capital growth. The health mutual fund returned 5.01% in the last one year and has a five year annualized return of 2.85%.

Michael P. Byrum is the fund manager and has managed this health mutual fund since 1998.

To view the Zacks Rank and past performance of all health mutual funds, then click here.

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