Which Healthcare Fund To Buy: FSHCX Or PRHSX?

Investors often rely on the healthcare sector to safeguard their investments. This is because demand for healthcare services does not vary so much with market conditions and investments in the sector providing sufficient protection to the capital invested.

So far this year, mega-scale healthcare mergers, corporate restructuring as well as FDA approvals have buoyed gains for the space. As a matter of fact, the U.S. healthcare sector is anticipated to experience a major revolution in the days to come. The coronavirus pandemic is likely to shape up the future for the space.

Mutual funds are perfect choices for investors looking to enter this sector since they possess the advantages of wide diversification and analytical insight. However, choosing the right mutual funds for your portfolio can become cumbersome. Let us, therefore, discuss which of the following two funds are better for you.

Fidelity Select Health Care Services Portfolio (FSHCX)

This fund seeks long-term growth of capital and invests the bulk of its shares in securities of companies involved in ownership and management of hospitals, nursing homes and health maintenance organizations. FSHCX also invests in companies that provide direct healthcare services. This non-diversified fund invests in common stocks of both U.S. and non-U.S. companies.

This Sector-Health product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 10.9% over the 3-year and 8.9% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.

The Fidelity Select Health Care Services Portfolio fund, as of the last filing, allocates its assets in top two major groups — Large Value and Foreign Stock. Further, as of the last filing, Unitedhealth Group Inc., Cigna Corp (NYSE:CI). and Humana Inc (NYSE:HUM). were the top holdings for FSHCX.

This product with a Zacks Mutual Fund Rank #2 (Buy) was incepted in June 1986 and is managed by Fidelity. FSHCX carries an expense ratio of 0.76% and requires a minimal initial investment of $0.

T. Rowe Price Health Sciences Fund (PRHSX)

This fund is a non-diversified fund that invests more than 80% of its assets in common stocks of companies engaged in various activities in the field of healthcare, medicine or life sciences. The fund mostly invests in mid- and large-capitalization companies.

This Sector-Health product has a history of positive total returns for over 10 years. Specifically, the fund’s returns over the 3 and 5-year benchmarks are 11.5% and 7.3%, respectively. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.

T. Rowe Price Health Sciences Fund, as of the last filing, allocates its assets in the top two major groups — Small Growth and Foreign Stock. Further, as of the last filing, Unitedhealth Group Inc. and Intuitive Surgical Inc (NASDAQ:ISRG) were the top holdings for PRHSX.

This product with a Zacks Rank #2 (Buy) was incepted in December 1998 and is managed by T. Rowe Price. PRHSX carries an expense ratio of 0.92% and requires a minimal initial investment of $2,500.

To Conclude

While both FSHCX and PRHSX are recommended buys, upon having a closer look, we find that the former is a clear winner. PRHSX is much more expensive compared to FSHCX (it has a minimum initial investment $2,500 compared to FSHCX’s $0). Further, its administrative and other operating expenses are also higher compared to FSHCX. So, one should clearly bet on FSHCX for higher returns on low investments.

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