When thinking of ASX shares that might prove a good investment in 2020, one’s mind immediately jumps to the healthcare sector.
Healthcare is an evergreen, recession-proof industry at the best of times, but I think 2020 has highlighted the importance that healthcare companies can play in the global economy.
The ASX has many top healthcare companies in its own right. You have the beloved CSL Limited (ASX: CSL) – now the ASX’s largest company. There’s also Ramsay Health Care Limited (ASX: RHC) and Cochlear Limited (ASX: COH).
These companies do have global exposure. But I think investors looking for even more diversification should look at the iShares Global Healthcare ETF (ASX: IXJ).
A healthy ETF for your portfolio?
The iShares Global Healthcare ETF (exchange-traded fund) tracks a basket of over 100 healthcare shares from around the world. You are getting the truly massive global healthcare companies like Johnson & Johnson (maker of Band-Aids and Listerine), Pfizer (Lyrica, Robitussin and the little blue pill) and Novartis (Ritalin). For some perspective here, Johnson & Johnson alone is over 4 times as large as CSL by market capitalisation.
This ETF is heavily weighted toward US shares with a 68% weighting, but you also get a fair chunk of exposure to Switzerland, Japan and the United Kingdom.
The durability and ‘recession-proof’ nature of this industry can be seen in these performance numbers. IXJ has returned 17.23% in the last year alone, and an average of 9.13% per annum over the last 5 years. That compares very well against the S&P/ASX 200 Index (ASX: XJO), which has returned -14.42% and 1.39% over the same periods respectively (including dividend reinvestment).
A management fee of 0.47% per annum isn’t the cheapest on the ETF market, but it’s still not too expensive in my view (remember, 0.47% translates to $4.70 for every $1,000 invested every year). For this unique exposure to the global healthcare sector, I think it’s well worth it for this investment.
Thus, I think the IXJ ETF could be used as a strong ‘core’ holding in any ASX portfolio, whether it be growth or income-focused. You shouldn’t expect massive returns every year (like the last year has seen for this ETF), but I think it’s a strong and stable investment that you don’t have to worry about becoming obsolete with technological change or shifting consumer tastes like some other ASX shares.
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Sebastian Bowen owns shares of Johnson & Johnson, Pfizer and Ramsay Health Care Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Johnson & Johnson. The Motley Fool Australia has recommended Cochlear Ltd. and Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.