An adaptable sector
“In our opinion, the Affordable Care Act definitely created some headwinds the way it was written,” Colón says, noting the law increased fees and taxes on some health care companies. At the same time, it also expanded the number of people with health insurance, which in turn can mean higher sales of drugs, medical devices, and medical services. In the time since it was enacted, however, insurance companies and other health companies have adapted to the new health care marketplace — especially the bigger, diversified managed care companies, Colón says.
So far, efforts to “repeal and replace” the Affordable Care Act in Congress have been unsuccessful, but there is still plenty of talk in Washington about making changes to — or eliminating entirely — the law.
“Just the idea of something happening without a concrete direction or actual plan creates uncertainty,” Colón says. “Uncertainty is one of the biggest things the market doesn’t like.”
Other legislation in Washington, though, could be a boon for some segments of the health care economy. For instance, if tax reforms encouraged companies to repatriate dollars from overseas — perhaps through temporary lower tax rates on those earnings — it could spark more mergers and acquisitions among biotech, pharmaceutical, and medical device companies.
Health care is often seen as a defensive investment, Colón says — perhaps a good place to consider regardless of market and economic conditions. After all, people still get sick no matter what the economy is doing.
While health care is a large and diverse sector, not every investment is appropriate for all people. Turning to a Financial Advisor can help you learn which investments may be applicable to your portfolio.
“Investing in biotech would not be a very good idea for a very conservative, income-oriented investor,” Colón says. “Biotech firms tend to be a lot more speculative in nature than your more established large pharmaceutical companies.”
Health care investment opportunities can also help meet other portfolio goals, such as international exposure.
“There are a lot of companies with good research efforts and good products that are based outside the United States,” Colón says. “It tends to be a little bit more focused in the pharmaceutical and biotech area.”
No matter what an investor’s goals are, there’s a good chance health care should be part of the strategy.
“There’s a lot of innovation within health care that leads to a lot of growth,” Colón says. “And the demographics are really the biggest thing that’s driving much of this.”