The State Street Health Care Select Sector SPDR ETF (NYSEMKT:XLV) offers broad exposure to the S&P 500 healthcare sector at a low cost, whereas the Invesco Biotechnology & Genome ETF (NYSEMKT:PBE) targets a concentrated niche of biotechnology companies.
Choosing between these two ETFs involves balancing broad sector stability against the high-growth potential of a specific industry. While XLV offers diversified exposure to the largest healthcare names in the S&P 500, PBE utilizes a quantitative approach to target 30 U.S. firms leading the way in genomic engineering and biotechnology research. This comparison highlights the trade-offs between a low-cost, established fund and a more specialized, higher-fee industry play.
Snapshot (cost & size)
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 July 30.
The State Street fund is significantly more affordable for long-term holders, featuring an expense ratio of 0.08%. In contrast, the Invesco fund carries a 0.58% expense ratio, reflecting the higher costs associated with its more active, dynamic indexing strategy. Yields are comparable, as both funds currently distribute between 1.6% and 1.7%.
Performance & risk comparison
What’s inside
State Street Health Care Select Sector SPDR ETF provides exposure to 60 holdings, all of which are classified as healthcare stocks. Its largest positions include Eli Lilly & Co (NYSE:LLY) at 16.5%, Johnson & Johnson (NYSE:JNJ) at 10.6%, and AbbVie (NYSE:ABBV) at 7.7%. It was launched in 1998. State Street Health Care Select Sector SPDR ETF has paid $2.53 per share over the trailing 12 months, which on its recent ~$163.52 share price works out to a 1.6% yield.
Invesco Biotechnology & Genome ETF is a more focused vehicle, holding 30 U.S. companies, all also in the healthcare sector. Its largest positions include Vertex Pharmaceuticals (NASDAQ:VRTX) at 5.2%, Biogen Inc (NASDAQ:BIIB) at 5.1%, and Amgen Inc (NASDAQ:AMGN) at 4.9%. It was launched in 2005. Invesco Biotechnology & Genome ETF has paid $1.55 per share over the trailing 12 months, which on its recent ~$91.10 share price works out to a 1.7% yield.
Which fund is the better buy?
Both these funds offer access to American pharmaceutical companies but have some key differences investors will want to take into account when weighing their options.
The State Street ETF, XLV, is larger by assets and much cheaper by expense ratio than its counterpart. XLOV holds 76% of its assets in large-cap stocks, mostly value style, with 22% in mid-caps and the balance in small caps.
By comparison, PBE is just 15% in large caps and 52% in small caps, with the rest in mid caps. That means these funds should vary dramatically at times, given that large-cap and small-cap stocks sometimes fall in and out of favor with market participants at differing times.
Given the reliance on small caps in its portfolio, it is no surprise that PBE has been outperforming its State Street rival in recent months. Small cap stocks are in the midst of their best year since 1991. PBE is up 10.2% year-to-date 2026 compared to 3.4% for VLX, in addition to the one-year outperformance noted above. PBE also bests XLV over the past three years, returning an annualized 13% compared to 7.9% for XLV.
However, XLV beats PBE in the 5-year and 10-year look-backs, returning 6.4% and 10.1% respectively to XLV’s 4% and 8.4% 5- and 10-year annualized returns.
So which U.S. pharma ETF is the better buy? For 2026, PBE seems likely to continue to reap the benefits of its preference for small-cap stocks, even as XLV shows itself to be a smart long-term choice for investors who may prefer a more diverse, large-cap stock focus.
For more guidance on ETF investing, check out the full guide at this link.
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Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Amgen, Eli Lilly, and Vertex Pharmaceuticals. The Motley Fool recommends Biogen and Johnson & Johnson. The Motley Fool has a disclosure policy.
XLV vs PBE: Is a Low-Cost Healthcare ETF the Better Buy Than a Focused Biotech Specialist? was originally published by The Motley Fool
