Which Healthcare Mutual Fund to Buy: FSMEX or PRHSX? – May 18, 2020

One of the best ways to safeguard investments is by parking money in the healthcare sector. This is because demand for healthcare services does not change with market conditions and investments in the sector provide sufficient protection to the capital invested. Many pharma companies also pay out regular dividends.

Companies that consistently offer dividends are financially stable and generate steady cash flows irrespective of market conditions. Mutual funds are perfect choices for investors looking to enter this sector since they possess the advantages of wide diversification and analytical insight.

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.

In such circumstances, investing in healthcare mutual funds seems prudent. However, choosing the right mutual funds for your portfolio can be quite tricky. To that end, let us find out which of the two funds discussed below is better.

Fidelity Select Medical Technology and Devices Portfolio (FSMEX Free Report)

This fund aims for capital growth. It invests the majority of its assets in companies that are engaged in activities such as research, manufacturing, supply and sale of medical equipment and related technologies. The non-diversified fund invests in common stocks and in U.S. and non-U.S. issuers.

This Sector-Health product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 16.5% over the 3-year and 15.3% 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 Medical Technology and Devices Portfolio fund, as of the last filing, allocates its assets in top two major groups — Large Growth and High Yield Bond. Further, as of the last filing, Boston Scientific Corp, Becton Dickinson & Company and Thermo Fisher Scientific were the top holdings for FSMEX.

This product with a Zacks Mutual Fund Rank #1 (Strong Buy) was incepted in April 1998 and is managed by Fidelity. FSMEX carries an expense ratio of 0.71% and requires a minimal initial investment of $0.

T. Rowe Price Health Sciences Fund (PRHSX Free Report)

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 13.2% and 8.6%, 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 were the top holdings for PRHSX.

This product with a Zacks Rank #2 (Buy) was incepted in December 1995 and is managed by T. Rowe Price. PRHSX carries an expense ratio of 0.76% and requires a minimal initial investment of $2,500.

To Conclude

While both FSMEX 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 FSMEX (it has a minimum initial investment $2,500 compared to FSMEX’s $0). Further, its administrative and other operating expenses are also higher compared to FSMEX. So, one should clearly bet on FSMEX for higher returns on low investments.

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