In 2025, the healthcare sector on Wall Street adopted a more constructive tone, offering investors a cautiously optimistic outlook even as notable challenges persist. After several years of lagging high-growth areas of the market, healthcare has gradually regained attention for its stability, reasonable valuations and long-term demand drivers.
Healthcare’s defensive nature has been an important support this year. Periodic market volatility has pushed investors toward sectors with steady demand, and healthcare has benefited from its essential role in the economy. Structural trends such as an aging population, rising healthcare utilization and continued focus on improving patient outcomes have reinforced confidence in the sector’s long-term growth potential. Compared with many other industries, healthcare valuations in 2025 have remained relatively attractive, encouraging interest from long-term, fundamentals-driven investors.
Innovation has also helped strengthen sentiment. Progress in medical technology, data-driven healthcare delivery and operational efficiency has improved expectations for sustainable growth over time. While innovation cycles can be uneven, the broader market has increasingly recognized healthcare as an area capable of generating durable value rather than short-lived momentum.
Despite this improving outlook, challenges remain. Regulatory and policy uncertainty continues to weigh on investor confidence, particularly around pricing, reimbursement and healthcare reform discussions in Washington. Cost pressures, including labor and operational expenses, have constrained margins across parts of the sector. Irrespective, the S&P 500 Healthcare Select Sector SPDR (XLV) has advanced 15.3% year to date.
Hence, astute investors might choose to bet on healthcare mutual funds at present. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
We have thus selected three such healthcare mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy), 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio.
T. Rowe Price Health Sciences PRHSX mainly invests in common stocks of companies involved in healthcare, medicine, or life sciences, including those focused on research, development, manufacturing and distribution of related products and services.
Ziad Bakri has been one of the lead managers of PRHSX since April 2016. The fund has 8.7% of its portfolio invested in Eli Lilly, 4.8% in Intuitive Surgical and 4.6% in Stryker.
PRHSX’s 3-year and 5-year annualized returns are 6.9% and 5.6%, respectively. Its net expense ratio is 0.83%. PRHSX has a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Janus Henderson Global Life Sciences JNGLX seeks to achieve its investment objective by primarily allocating the majority of its assets to companies with a life sciences focus. The fund follows a fundamental policy of maintaining a meaningful portion of its portfolio in securities classified within the life sciences sector.
Andrew Acker has been the lead manager of JNGLXsince April 2007. The fund has 8.8% of its portfolio invested in Eli Lilly, 4.5% in UnitedHealth Group and 4.1% in AstraZeneca.
JNGLX’s 3-year and 5-year annualized returns are 11.3% and 8.7%, respectively. Its net expense ratio is 0.80%. JNGLXhas a Zacks Mutual Fund Rank #2.
Fidelity Select Health Care FSPHX primarily invests in common stocks of domestic and international companies involved in healthcare or medical products and services. It selects investments using fundamental analysis, evaluating financial strength, industry standing and broader market conditions, and follows a non-diversified investment approach.
Edward Yoon has been the lead manager of FSPHX since October 2008. The fund has 7.5% of its portfolio invested in Boston Scientific, 6% in Danaher and 5% in Eli Lilly.
FSPHX’s 3-year and 5-year annualized returns are 7.9% and 5.3%, respectively. Its net expense ratio is 0.62%. FSPHX has a Zacks Mutual Fund Rank #1.
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Get Your Free (FSPHX): Fund Analysis Report
Get Your Free (PRHSX): Fund Analysis Report
Get Your Free (JNGLX): Fund Analysis Report
This article originally published on Zacks Investment Research (zacks.com).