Vanguard Health Care ETF vs State Street XLV: Which ETF Is the Better Buy for Investors in 2026?

Vanguard Health Care ETF offers much broader diversification with 411 holdings compared to the 60 stocks in State Street Health Care Select Sector SPDR ETF.

State Street Health Care Select Sector SPDR ETF is slightly more cost-effective with an expense ratio of 0.08% versus 0.09% for the Vanguard fund.

While Vanguard Health Care ETF has higher 1-year total returns, State Street Health Care Select Sector SPDR ETF has achieved higher overall growth for a $1,000 investment over the last five years.

The State Street Health Care Select Sector SPDR ETF (NYSEMKT:XLV) provides concentrated exposure to blue-chip healthcare giants, while the Vanguard Health Care ETF (NYSEMKT:VHT) offers a wider reach including small- and mid-cap companies.

Healthcare remains a cornerstone of the American economy, and these two funds offer distinct ways to own it. While both seek to track the performance of the medical and wellness industries, the degree of diversification varies significantly between the two portfolios, impacting concentration risk and market-cap exposure.

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-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the close of trading on August 8.

The State Street fund is nominally more affordable with an expense ratio of 0.08%, just one basis point below the Vanguard fund's 0.09%. Both funds currently offer an identical 1.5% dividend yield, making management costs a primary differentiator.

The Vanguard Health Care ETF tracks a broad index of medical companies, providing exposure to 423 holdings. This breadth includes many small- and mid-sized firms that its competitor ignores, and its largest positions include Eli Lilly & Co (NYSE:LLY) at 14.2%, Johnson & Johnson (NYSE:JNJ) at 8.9%, and AbbVie Inc (NYSE:ABBV) at 6.6%. Launched in 2004, it is heavily weighted toward healthcare at 99%, with slight exposure to financial services, technology, and industrials. The Vanguard Health Care ETF has paid $4.72 per share over the trailing 12 months, which on its recent $309.02 share price works out to a 1.5% yield.