VHT vs. PBE: Which Health Care ETF Is the Better Buy?

The Invesco Biotechnology & Genome ETF (PBE -0.66%) offers a focused, high-momentum approach to the biotechnology sector, while the Vanguard Health Care ETF (VHT -1.91%) provides broad, low-cost exposure across the entire healthcare landscape — from pharmaceutical giants to equipment makers to healthcare providers.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Cost is a major differentiator here. VHT charges just 0.09% a year, versus 0.58% for PBE. The funds’ dividend yields are in the same ballpark, with VHT paying 1.58% and PBE paying 1.73%

Performance & risk comparison

What’s inside

Launched in 2004, VHT uses a passive management approach to track the broader healthcare sector and holds 423 stocks. Its largest positions include Eli Lilly (LLY -0.87%) at 14.2%, Johnson & Johnson (JNJ -2.29%) at 8.9%, and AbbVie (ABBV +0.04%) at 6.5%.

PBE takes a narrower path, holding 31 U.S. companies chosen for price momentum, earnings growth, and management quality. Its top holdings include Vertex Pharmaceuticals (VRTX -1.44%) at 5.2%, Biogen (BIIB +1.76%) at 5.1%, and Amgen (AMGN -1.39%) at 4.97%.

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What this means for investors

What are you looking for in a healthcare ETF — breadth or targeted bets? That’s the first question to ask when deciding between these two funds.

VHT’s 423 holdings span the entire healthcare industry — pharma, insurers, device makers, and hospital operators — but that breadth is a bit deceptive. Like most cap-weighted funds, VHT still concentrates its bets at the top: Eli Lilly, Johnson & Johnson, and AbbVie alone make up nearly 30% of the portfolio. So while a mid-cap device maker’s stumble won’t dent returns much, a stumble at Eli Lilly — its largest holding at 14% — would still be felt. Still, VHT’s broad portfolio, paired with a 0.09% expense ratio, makes it a low-drama way to stay invested in a sector that tends to hold up reasonably well even when the overall market wobbles.

PBE is a different story. With just 31 holdings screened for growth and momentum, it’s making a more targeted bet on biotech innovation. That’s why it’s been able to boast a stellar 40.9% one-year return — and it’s also why the fund has experienced a far deeper 5-year maximum drawdown. Biotech stocks live and die by binary events like FDA decisions and trial data, which help fuel both rallies and crashes.

Both approaches have merit depending on an investor’s goals and strategy. VHT is the better fit for investors who want steady, lower-cost exposure to a broader healthcare theme and can live with some large-cap concentration risk at the top of the portfolio. PBE suits investors with a higher risk tolerance who are specifically chasing biotech’s growth potential, and who are willing to stomach sharper swings — and a steeper expense ratio — to get it.