Health is a growth market. The sector ranges from pharmaceutical manufacturers and companies in medical and biotechnology to operators of hospitals and care facilities. In a broadly diversified portfolio, „Health Care“ should not be missing.
It is supposed to turn the industry on its head and usher in a new era. Putting it to use is meant to save a great deal of time and money. We are talking — how could it be otherwise — about artificial intelligence. As in many other sectors of the economy, it is currently a red-hot topic in healthcare too.
Artificial intelligence is meant to help detect diseases earlier and care for people better, among other things by rapidly processing enormous volumes of data.
Pharmaceutical companies, for instance, hope for a considerable acceleration of drug development. There is definitely potential here to boost efficiency. According to the German Association of Research-Based Pharmaceutical Companies, developing a new medication currently takes an average of around 13 years. Along the way, roughly 90 percent of drugs fail in the clinical testing phase.
Megatrends underpin growth
Whether artificial intelligence will deliver the effects the industry hopes for remains to be seen. But the sector is credited with growth potential one way or another. The market research institute IQVIA, for example, forecasts a global pharmaceutical market volume of around 2.3 trillion US dollars by 2028. New medications in particular are expected to provide the momentum.
This growth is underpinned by major societal trends. The number of people in the world keeps growing and already stands at more than 8 billion. More and more people are living longer and longer. The United Nations expects life expectancy to climb to around 80 years for women and around 75 years for men by 2050. For comparison: in 1950 it was around 48 years for women and around 45 years for men. In addition, prosperity is growing in many countries. Taken together, all of this points to rising demand for the healthcare industry’s products and services.
But of course the opportunities are matched by risks. These come, among other things, from the regulatory sphere. Political decisions are very important for the sector. Whether it’s about hurdles for approving new medications or questions of how to finance the healthcare system: health policy has a major influence on the companies in the industry.
Diversification is advisable
No one can yet foresee how the political course will be set in the future. Just as little as anyone can know now which companies will be among the winners down the road. For this reason, when investing in the healthcare sector — as with investing in general — it is advisable to spread your portfolio. The thematic portfolio „Health & Innovation“ from quirion achieves this through a combination of selected ETFs. Thanks to this diversification, the risk-return ratio is more balanced than it would be with individual stocks, for example.
Even so, an investment that focuses on particular themes always carries higher risks than investing in a globally diversified portfolio like quirion’s global ETF portfolio. There, the weighting of sectors and regions is based on the respective market capitalization. Among the currently around 8,000 stocks in which the portfolio holds a stake via ETFs, there are also numerous companies from the healthcare sector.
But if, in your investing, you want to set your own focus beyond a core investment such as the global ETF portfolio: quirion offers ETF portfolios covering 12 individual themes in total — besides „Health & Innovation“, for example, also one on „Artificial Intelligence“. The thematic portfolios consist of 100 percent equity ETFs. During the application process, quirion checks in advance whether this form of investing matches your personal risk appetite and your individual investment horizon.
