The pandemic supercharged the growth of telemedicine and digital health services. Here we’ll check out the best telemedicine ETFs to capture telehealth exposure in 2022.
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Contents
Introduction – Why Telemedicine Stocks?
As with most disruptive technologies, consumers were wary at first of a digital model for healthcare. Then the 2020 pandemic hit, forcing people to stay inside and thus simultaneously accelerating the adoption of telemedicine of necessity. This opened up trends and systems that are here to stay.
As we’d expect, telemedicine use surged in the first half of 2020, a revolution in itself born of a black swan event. Those who have grown accustomed to it will likely stick with it. As a result, hospitals, physicians, and insurers have been rapidly investing in telehealth infrastructure and protocols.
The foundational idea is to connect patients and healthcare providers digitally. It’s clear this is not a temporary shift. The widespread adoption of this technology illustrates that not everyone needs to visit the doctor’s office in person. 11% of Americans were open to the idea of virtual healthcare pre-pandemic. That number is now 76%.
Telemedicine services go hand-in-hand with the already-burgeoning online pharmacy model. In certain instances, a virtual doctor can provide diagnoses, treatment recommendations, medication management, and follow-ups. Couple this with an aging population and improving healthcare initiatives in developing countries and the stage is set for “long-term tailwinds,” as BlackRock notes.
As with any industry in its volatile infancy, it’s likely best to buy a basket of stocks instead of trying to pick a few winners. Currently, there’s only one single ETF dedicated to this narrow market segment. It’s EDOC, the Global X Telemedicine & Digital Health ETF. EDOC launched in July, 2020 and has since amassed nearly $500 million in assets. The fund focuses on companies around the world involved in telemedicine, healthcare analytics, healthcare devices, and administrative digitization. The underlying proprietary index – the Solactive Telemedicine & Digital Health Index – is market cap weighted with a 4% cap for individual securities.
Note that broader healthcare ETFs like VHT from Vanguard will also have minimal exposure to some of these same companies involved in telehealth if you simply desire a broader healthcare sector tilt. Specifically, EDOC has about 10% overlap with VHT by weight.
Where To Buy This Telemedicine ETF
EDOC should be available at any major broker. My choice is M1 Finance. The broker has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, and a modern, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here.
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Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.
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