In an era where technology is revolutionising every aspect of our lives, the healthcare sector is experiencing unprecedented transformation. Healthtech, the integration of technology and healthcare, is leading this change, offering innovative solutions that improve patient care, streamline administrative processes, and enhance medical research.  

For investors, Healthtech represents a burgeoning opportunity to diversify their portfolios and capitalise on the rapid growth of this dynamic sector. This article explores four ways to gain exposure to Healthtech, helping you navigate and invest in this exciting field. 

Key Points 

• Healthtech investments offer significant diversification benefits and the potential for high returns, driven by technological advancements and increasing demand for innovative healthcare solutions. 
• Investors can gain exposure to the Healthtech sector through ETFs, mutual funds, individual stocks, crowdfunding, and angel investing, each offering different risk and return profiles. 
• A diversified Healthtech portfolio should include early-stage startups, growth-stage companies, and mature players to balance potential rewards with associated risks, ensuring a well-rounded investment strategy. 

What Is Healthtech 

Healthtech, also known as Healthtech technology, refers to the use of technology to improve aspects of the Healthtech system.  

This includes a wide range of application, from telehealth services to robotic-assisted surgery. It encompasses any IT tools or software designed to enhance hospital and administrative productivity, offer new insights into medicines and treatments, or improve the overall quality of healthcare provided. 

Healthtech’s reach includes telemedicine platforms like Teladoc and Doctor on Demand, electronic health records (EHR) systems such as those by Epic Systems and Cerner, wearable health monitoring devices like Fitbit and Apple Watch, and advanced robotic-assisted surgical systems, notably the da Vinci Surgical System by Intuitive Surgical. Biotech innovations, such as CRISPR gene editing, also fall under Healthtech, demonstrating the sector’s vast and multifaceted nature. 

Why Add Healthtech into Your Portfolio 

Diversification 

Investing in Healthtech can provide diversification benefits to your portfolio. Since Healthtech companies operate in a specialised sector that often behaves differently from the broader market, they can offer a hedge against volatility in other industries. 

For example, while traditional sectors like manufacturing or retail might suffer during an economic downturn, Healthtech could thrive due to ongoing demand for healthcare services and innovations. 

Market Growth 

The Healthtech sector is experiencing significant growth due to technological advancements and an increasing focus on personalised medicine.  

Innovations such as AI-driven diagnostics, telemedicine, and personalised treatment plans are transforming healthcare delivery. With the global telehealth market projected to grow at a compound annual growth rate (CAGR) of 24.3% from 2024 to 2030, according to Grand View Research ^[1], this growth presents significant opportunities for investors to capitalise on emerging trends and innovations. As the sector expands, potential returns for Healthtech investments are poised to rise, driven by increasing demand and transformative breakthroughs in healthcare technology. 

Potential Returns

Healthtech investments can offer substantial potential returns. With the ongoing development of groundbreaking technologies and treatments, early investments in successful Healthtech ventures can yield high returns. For instance, early investors in companies like Moderna, which developed a successful COVID-19 vaccine, saw significant returns on their investments. 

In 2020, the Moderna (MRNA) stock price increased by over 400% in that year alone, illustrating the potential upside of investing in innovative Healthtech companies ^[2]. 

4 Ways to Gain Healthtech Exposure in Your Portfolio 

Healthtech ETFs

For broader Healthtech exposure, consider Healthtech ETFs like:  

• iShares Global Healthcare ETF 
• iShares U.S. Medical Devices ETF (IHI) 
• ARK Genomic Revolution ETF (ARKG)  

ETFs, or Exchange-Traded Funds, are investment funds traded on stock exchanges that comprise of a basket of assets like stocks. They offer lower risk and seek to track the performance of an index, making them a suitable option for investors seeking diversified exposure to the Healthtech sector without the need to pick individual stocks. 

You can buy ETFs directly on the stock exchange through a brokerage account, just like purchasing individual stocks. Alternatively, you can invest in ETFs via Contracts for Difference (CFDs), which allow you to speculate on the price movements of ETFs without owning the underlying assets. 

Both methods offer flexibility and ease of access for investors looking to gain exposure to the Healthtech sector. 

Healthtech Mutual Funds

Mutual funds pool money from many investors to purchase a diversified portfolio of stocks and bonds. These funds are easy to access and professionally managed, providing another avenue for Healthtech investment.  

Notable examples include the Fidelity Select Health Care Portfolio (FSPHX) and the T. Rowe Price Health Sciences Fund (PRHSX). Mutual funds can be a good choice for investors looking for a diversified, professionally managed portfolio with exposure to the Healthtech sector. 

You can buy into mutual funds through several channels: 

• Directly from the Fund Company: Many mutual fund companies allow investors to purchase shares directly through their websites or by contacting their customer service departments. 
• Through a Brokerage Account: Online brokerage platforms offer access to a wide range of mutual funds. You can open an account, deposit funds, and select the mutual funds you wish to invest in. 
• Financial Advisors: Financial advisors can help you select appropriate mutual funds based on your investment goals and risk tolerance. They can handle the purchasing process on your behalf. 

These options provide flexibility and convenience for investors looking to add Healthtech mutual funds to their portfolios. 

Buy Individual Healthtech Shares

Investors can also buy individual shares in Healthtech by monitoring company performance, innovation, market potential, and financial health.  

Individual shares carry higher risk compared to ETFs and mutual funds due to the lack of diversification, but they can bring potentially higher returns when the company performs well.  

Some shares to consider include Teladoc Health (TDOC), a leader in telemedicine services, and Intuitive Surgical (ISRG), known for its robotic-assisted surgical systems. Investing in individual shares requires thorough research and understanding of the company’s business model, competitive positioning, and growth potential. 

You can trade individual Healthtech shares through CFDs on online brokerage platforms such as Vantage. Begin your Healthtech investment journey with Vantage by opening a live account and enjoy $0 commissions when you trade selected US shares. 

Discover the top Healthtech firms to invest in for 2024 in our article here. 

Crowdfunding and Angel Investing

Crowdfunding platforms are websites where investors can fund startups and early-stage companies. Angel investing involves providing capital to startups in exchange for equity.  

Crowdfunding platforms such as SeedInvest and Crowdcube allow investors to get involved in early-stage Healthtech ventures. Angel investing platforms like AngelList connect startups with angel investors. These methods offer the potential for high returns but also come with higher risk due to the nature of startup investments. 

The market value of the crowdfunding industry was $12.27 billion U.S. dollars in 2021. The market is projected to double by 2027, growing at a compound annual growth rate (CAGR) of 11% ^[3]. 

Building a Comprehensive Healthtech Investment Portfolio 

Understanding the Healthtech Ecosystem

To build a comprehensive Healthtech investment portfolio, it’s essential to understand the various components and subsectors within the Healthtech ecosystem.  

Healthtech is a broad and dynamic field that includes several key areas like biopharma, digital health, and health IT, each offering unique opportunities and challenges. By understanding these different areas, investors can make informed decisions about where to allocate their capital. 

For instance, digital health, which includes telemedicine and wearable devices, is projected to grow significantly in the coming years. According to Business Insider, the global digital health market is expected to surpass USD$295.4 billion by 2028 ^[4]. 

Similarly, the biopharma sector, which focuses on biotechnological drug development and gene therapy, presents substantial growth opportunities with the advent of personalised medicine. 

Learn more about the different sectors of Healthtech in our other article here.  

Balancing Risk and Reward

If you’re looking for a more comprehensive Healthtech portfolio that balances risk and reward, you can aim to allocate capital across different Healthtech subsectors and investment stages. 

1. Early-stage Startups 

Early-stage startups in Healthtech are companies that are in the initial phases of development. These companies often have innovative solutions but are yet to prove their viability. Investing in early-stage startups carries higher risk due to the uncertainty of their success. However, they offer substantial upside potential if they succeed.  

According to a study done by Fierce Healthcare, the global digital health funding reached $57.2 billion in 2021, which was a 79% jump from the $32 billion raised globally in 2020 ^[5]. These numbers show the growing interest in smaller players in the Healthtech industry. 

Investors should look for startups with strong management teams, innovative products, and a clear path to market. Participating in crowdfunding platforms or angel investing networks can provide access to these high-potential opportunities. 

But be careful when investing in startups as,  

“There’s an inherent risk of seeing innovations being too ahead of its time.” 
Arnaud Bauer, Partner at LEK Consulting 

2. Growth-Stage Companies 

Growth-stage companies have moved beyond the startup phase and have demonstrated viability and scalability. These companies typically have established products or services, a growing customer base, and increasing revenues.

Investing in growth-stage companies involves moderate risk, as these firms have proven their business models but still have significant growth potential. Investors should seek companies with strong financial performance, competitive advantages, and robust market demand. 

3. Mature Players 

Mature Healthtech companies are well-established firms with a history of stable performance. These companies often dominate their respective markets and provide stability and dividends to investors.

Examples include Cerner Corporation and Philips Healthcare. Investing in mature players involves lower risk compared to startups and growth-stage companies. These firms offer consistent returns, making them suitable for investors seeking stability and income in their portfolios. They are also easier to buy into, particularly if they’re listed on global stock exchanges. 

By balancing investments across these categories, investors can create a well-rounded Healthtech portfolio that maximises potential returns while mitigating risk. This approach allows for participation in the rapid growth and innovation within Healthtech while maintaining a level of stability through investments in established companies. 

Conclusion 

In conclusion, there are various methods to gain Healthtech exposure, including ETFs, mutual funds, individual stocks, crowdfunding, and angel investing. Each method offers different benefits and risks, so it is essential to conduct thorough research and due diligence before investing.  

The Healthtech sector holds significant growth potential and plays a crucial role in a diversified investment portfolio. By understanding the Healthtech ecosystem and balancing risk and reward, investors can capitalise on the promising opportunities within this dynamic sector. 

Open an account with Vantage Markets today and start exploring the exciting opportunities in Healthtech. Join the movement towards a healthier, more technologically advanced world. 

Read more about the Healthtech industry on The Vantage View website or stay updated with the Vantage Markets Podcast on Spotify. 

References

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