Which sector should I invest in 2020
Boom in the health industry: This is how investors benefit after Corona
- In the Corona crisis, stocks from the health and medical industry have risen sharply, in some cases. But individual stocks are risky.
- The industry also has good prospects beyond Corona. It is considered to be one of the most promising economic sectors.
- Investors can invest in the industry through funds and ETFs. They are available for the entire sector or for sub-areas such as biotechnology
On the "Shop Apotheke" website, protection against the corona pandemic is right at the top: Among the first eight purchase recommendations that the online pharmacy offers its customers, there are four different models of breathing masks in addition to the long-running headache relievers and muscle pain gel - From disposable protection to washable cotton masks to professional masks.
The Dutch internet pharmacy is in great demand with customers in Corona times - and with investors. This is shown by the share price: Since February 19, the beginning of the corona crisis on the global stock exchanges, the paper of Shop Apotheke Europe NV has more than doubled. The company benefited significantly from the pandemic - as did other companies from the health, medical and pharmaceutical industries.
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Individual stocks carry a higher risk
Manufacturers of vaccines such as the US company Moderna or the Mainz company BioNtech, for example, but also the producers of possible drugs against the virus such as Gilead Sciences or AbbVie also recorded strong price gains. Above all, the increases are based on the hope that companies will end up at the forefront of the race for an effective remedy for the virus. If this does not happen, however, the price increase is quickly lost again.
On the other hand, the outfitters and suppliers in the industry - such as the producers of protective masks such as the Lübeck-based company Drägerwerk or test kits such as those manufactured by the Hilden-based company Qiagen - recorded real increases in sales. Their share prices also often increased significantly thanks to the sales gains. However, it remains to be seen whether this will remain so in the long term. In fact, some of the quotations have already lost significantly again.
Broad diversification reduces risk
Investing in individual shares of the Corona profiteers can therefore be "extremely difficult" for investors, says Bernd Haferstock from Wiesbaden-based asset management company Habbel, Pohlig & Partner. "The best access for private investors is through the integration of funds," he advises. These could be based on a global "Healthcare" index. Investors can bet on such indices from the healthcare industry with ETFs. There are also funds that cover the sector - and its sub-areas such as biotechnology.
The experts agree that the industry has a promising future. The topic of health has "gained significantly in importance" because of the corona pandemic, says Mario Adorf, fund manager at Deka, the savings banks' fund company: "The crisis has clearly shown that investments are urgently needed here."
Asset manager Haferstock sees it similarly: "The corona pandemic will be the catalyst for further developments for various sectors in the health system," he says. This does not only apply to sectors such as pharmaceuticals, medical technology or biotechnology. An area such as telemedicine is also receiving a boost from the pandemic - for example, diagnosing an illness via the Internet.
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For the first time in the world more than 65-year-olds as children
In fact, the health sector has been promising for investors not just since Corona. "Health Care" is one of the megatrends of modern societies, according to a study by the "Bank of America Merril Lynch". One of the reasons for this is the aging society, according to the researchers. In the 2020s, for the first time, there will be more 65-year-olds than children in the world. Healthcare companies benefit particularly from the provision of care for the elderly.
In addition: Because of the corona pandemic, even more state funds are likely to flow into the sector in the future. For example, the 750 billion euro aid fund currently being discussed in Europe is also intended to "significantly direct investments where they are meaningful in the future: in the health sector," says asset manager Bernd Haferstock.
You always need health services
For investors, this means: An investment in the health industry can be worthwhile in the long term, even beyond Corona. The industry is considered to be comparatively defensive and independent of the economy: you always need health services - even in a downturn. The share prices in the sector therefore generally fall less than the market as a whole, even during weak phases on the stock exchange.
This was also evident in the Corona crisis: from the beginning of the crisis to the bottom of the share price on March 23, the global MSCI World index lost more than 34 percent. In the sub-index for health companies, the MSCI World Health Care, it was only 26 percent. The sub-index then followed the upward movement just as strongly as the parent index - good prerequisites for a long-term stable investment.
ETFs map the indices of the industry
Investors can bet on the global health sector with ETFs, for example with the iShares MSCI World Health Care Sector or the Xtrackers MSCI World Health Care. The index includes, in particular, large pharmaceutical companies such as Roche, Pfizer and Merck. However, it is also home to the US company Johnson & Johnson, which makes drugs such as Imodium and hygiene products such as Carefree.
Investors can invest in the trend of the aging society with a special ETF: More than half of the iShares Aging Population contains stocks from the healthcare industry. Investors also invest their money in companies from the financial world, for example in the Swedish broker and stock exchange company Avanza Bank or in consumer goods manufacturers such as the US manufacturer of leisure boats Malibu Boats.
More courageous investors can participate in the development of biotechnology through an ETF. One of the largest indices is the Nasdaq US Biotechnology Index. It can be mapped via the iShares Nasdaq Biotechnology ETF, for example. The index contains, among other things, the two companies Moderna and Gilead, which are active in corona research.
However, investors should bear in mind that the risk of price losses in the biotechnology sector is significantly higher than in the entire industry. For example, when researching drugs, the rule of thumb is that nine out of ten projects fail. Investing in the topic is correspondingly risky.
Excess returns are only possible with active funds
Investors who prefer to rely on the selection of a fund manager instead of investing in an index also have several options. Broadly diversified funds, which the rating agency Morningstar gave a good rating, are the AB International Health Care Portfolio of the fund company AllianceBernstein or the Bellevue Funds BB Adamant Medtech & Services, which mainly contains US companies. Both funds have the US company Intuitiv Surgical in their portfolio. She makes surgery robots.
When investing in actively managed funds, investors should be aware that the composition of the fund can change - depending on the strategy of the fund manager. This offers the chance of additional returns, the so-called outperformance. Investors should nevertheless check again and again whether the fund's portfolio still fits their ideas. And: The costs of such funds may be significantly higher than investing in an ETF.
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