FHLC vs. IYH: Which Healthcare ETF Is the Better Buy in 2026?

Fidelity MSCI Health Care Index ETF (FHLC) offers a lower expense ratio and higher dividend than the iShares U.S. Healthcare ETF (IYH).

IYH maintains a more concentrated portfolio, with 101 holdings compared to FHLC's 338 positions.

Both funds have similar risk profiles, with five-year maximum drawdowns of roughly 18%, along with comparable beta values.

The Fidelity MSCI Health Care Index ETF (NYSEMKT:FHLC) offers a significantly lower expense ratio and broader diversification than the iShares U.S. Healthcare ETF (NYSEMKT:IYH) , which may appeal to cost-conscious investors seeking wide sector exposure.

These two healthcare ETFs provide exposure to the broad American medical sector, covering pharmaceutical giants, biotechnology innovators, and medical equipment providers. However, the funds differ significantly in their indexing methodology and stock selection. This article examines how those differences affect their diversification, yield potential, and overall cost structure.

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

FHLC is significantly cheaper, charging an expense ratio of 0.08% annually compared to 0.38% for IYH. Compounded over many years, this 0.30 percentage point difference can make a meaningful impact on returns. Additionally, FHLC currently offers a slightly higher dividend yield of 1.40% compared to IYH’s 1.28%.

Launched in 2013, the Fidelity MSCI Health Care Index ETF (FHLC) provides broad exposure to the health care sector with 338 holdings. Its largest positions include Eli Lilly (NYSE:LLY) at 14.0%, Johnson & Johnson (NYSE:JNJ) at 8.6%, and AbbVie (NYSE:ABBV) at 6.1%. By tracking the MSCI USA IMI Health Care Index, it captures a wider array of small- and mid-cap companies that are often excluded from narrower healthcare benchmarks.