The Healthcare sector ranks fifth out of the 11 sectors as detailed in our Q2'18 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Healthcare sector ranked sixth. It gets our Neutral rating, which is based on an aggregation of ratings of 25 ETFs and 77 mutual funds in the Healthcare sector.

See a recap of our Q1'18 Sector Ratings here. Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Healthcare sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 363). This variation creates drastically different investment implications and, therefore, ratings.

] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds. 100 million for inadequate liquidity. 100 million and do not meet our liquidity minimums. 100 million for inadequate liquidity. 100 million and do not meet our liquidity minimums. Shares U.S. Healthcare Providers ETF (IHF) is the top-rated Healthcare ETF and Fidelity Select Health Care Services Portfolio (FSHCX) is the top-rated Healthcare mutual fund.

Both earn a Very Attractive rating. ETFis Series Virtus LifeSci Biotech Products ETF (BBP) is the worst-rated Healthcare ETF and Rydex Series Biotechnology Fund (RYBOX) is the worst-rated Healthcare mutual fund. Both earn a Very Unattractive rating. 318 stocks of the 3,000-plus we cover are classified as Healthcare stocks. Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance.

Don’t just take our word for it, see what Barron’s says on this matter. Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: Cut costs and fulfill the fiduciary duty of care.

Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions. Figures 3 and 4 show the rating landscape of all Healthcare ETFs and mutual funds. Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme. ] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts. ] Ernst & Young’s recent white paper “Getting ROIC Right” proves the superiority of our holdings research and analytics.

Like FQAL, FENY is available to Fidelity clients without a commission. There are nearly 40 U.S.-listed ETFs dedicated to the financial services sector, plenty of which qualify as solid options. Size alone is not a determinant of an ETF's value or alpha-delivering potential, but in the case of the Financial Select Sector SPDR (XLF), size does not hurt. As the largest ETF tracking this sector, XLF has low bid/ask spreads, a factor to consider for active traders.

Home to almost 70 stocks, XLF features companies in the diversified financial services; insurance; banks; capital markets; mortgage real estate investment trusts ("REITs"); consumer finance; and thrifts and mortgage finance industries. The largest financial companies in the U.S. There are important differences between diversified financial services ETFs, such as XLF, and bank ETFs.

The former group purports to be diversified while bank ETFs try to be dedicated to bank stocks without including capital markets firms or insurance providers. The First Trust Nasdaq Bank ETF (FTXO), which debuted in the third quarter of 2016, is new relative to other bank ETFs, but the fund employs an interesting methodology. FTXO tracks the Nasdaq U.S.

Smart Banks Index, which employs growth, value, and volatility factors in its weighting scheme. Components are weighted based on their scores across those factors. Due to the stringent natures of FTXO's smart beta weighting methodology, its lineup is small compared to well-known bank benchmarks. The First Trust ETF holds 30 stocks compared to 77 in the S&P Banks Select Industry Index.