Investing in health pays off

Published on: 25-Apr-2019
Category: Trading
Last updated: 25-Apr-2019

Investing in health pays off

Healthcare stocks continue to pay off and provide investors with security in uncertain market phases. The healthcare industry is constantly evolving and people are not saving when it comes to their health. This is also reflected in the global MSCI Healthcare index, which rose 1% last year, while the MSCI World lost 10%.

The healthcare industry continues to grow and new drugs are launched and new research results are made. In the US, there were discussions recently about a general statutory health insurance and cheaper prices for drugs. However, there are three major trends that are driving the market forward. On the one hand, demographic change is having a major impact on the healthcare industry worldwide, but new technologies and research and development are also contributing to growth. The people of the world are getting more and more and at the same time older. There are diseases of civilization, such as obesity or diabetes, and people invest in their health as income increases.

The healthcare market is dominated by a number of large pharmaceutical companies, such as Merck, Novartis or Bayer. But this market also includes American health insurers or hospital operators. But the pharmaceutical companies are expanding and seeking new areas and merging with other companies. US drug maker Bristol-Myers Squibb buys biotech group Celgene for $ 90 billion, one of the most expensive acquisitions in the industry.

However, diversification in the health sector is also important, as the Bayer case shows. One should invest not only in shares of individual companies, but in broad-based healthcare funds.
Meanwhile, states spend more money on health. According to the Organization for Economic Co-operation and Development (OECD), OECD member countries should spend 9.5 percent of GDP on health by 2060. This would increase the percentage by 3.3 percent since 2010. But even in the emerging economies, rising wealth is expected to increase healthcare spending.

The two trends in the new technologies and research and development industry bring growth but also challenges and risks. New technologies such as automation, artificial intelligence or big data are also having an impact in the health care industry, attracting big corporations like Google or Apple. In the future, the healthcare companies have to compete with these corporations. But research can also be dangerous for investors who are willing to take risks. There are currently 7,000 drugs in development worldwide, of which only 10 percent, which are then clinically tested, come on the market. As an investor, you should not try to predict success, but invest widely in health care.


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