Understanding Medical Device ETFs: Top Investment Options for 2025

Medical device ETFs have become an increasingly attractive investment approach for those seeking exposure to the healthcare sector without taking on the risk of individual stock ownership. These funds consolidate multiple companies that develop innovative technology to advance patient care, offering a balanced way to participate in the medical device industry’s growth potential.

Why Medical Device ETFs Matter in Healthcare Investment

Exchange-traded funds operate by holding a collection of equities, typically organized around a specific investment theme or industry focus. Unlike mutual funds, ETFs trade on stock exchanges with the same flexibility as individual stocks. A medical device ETF allows investors to target a specialized niche within healthcare while maintaining diversified holdings across numerous companies.

The primary advantage of this structure is risk mitigation. Rather than betting on a single company’s success or failure, investors gain exposure to a broader range of medical device manufacturers. If one company faces setbacks—such as a failed clinical trial or FDA rejection—the overall impact on the portfolio remains limited. Conversely, investors sacrifice some upside potential when portfolio companies achieve major breakthroughs.

How ETFs Reduce Risk in an Unpredictable Sector

The medical device sector is known for its volatility and unpredictability. Regulatory decisions, clinical outcomes, and competitive pressures can shift valuations dramatically. This inherent instability makes medical device ETFs particularly appealing for risk-conscious investors. By spreading investments across dozens of companies working on different technologies and treatments, ETF investors gain stability that individual stock pickers cannot easily achieve.

For those with lower risk tolerance, this diversification approach offers a practical entry point into healthcare investing. The downside protection comes with a tradeoff: spectacular gains in breakthrough companies get diluted across the entire fund.

Comparing the Two Leading Medical Device ETF Options

According to ETFdb.com, investors have three primary medical device ETF choices, though one remains significantly smaller. Here’s an examination of the two dominant options based on assets under management as of February 2025.

iShares US Medical Devices ETF (ARCA: IHI)

Total Assets: US$5.1 billion (as of February 11, 2025)

The iShares US Medical Devices ETF stands as the largest and most established option in this category, having launched in 2006. As of early 2025, the fund tracked 50 underlying companies across the medical device landscape.

The three largest positions by weight provide insight into the fund’s exposure:

• Abbott Laboratories (NYSE: ABT) develops medical devices targeting vascular disease management, diabetes care, and vision correction solutions.

• Intuitive Surgical (NASDAQ: ISRG) manufactures the da Vinci surgical and Ion endoluminal systems—robotic platforms engineered to improve surgical outcomes through minimally invasive techniques.

• Boston Scientific (NYSE: BSX) maintains a diversified portfolio encompassing gastroenterology, cardiac and vascular procedures, neurological surgery, orthopedic applications, and urological devices.

SPDR S&P Health Care Equipment ETF (ARCA: XHE)

Total Assets: US$208.99 million (as of February 11, 2025)

Established in January 2011, this SPDR fund offers a smaller but still meaningful alternative to IHI, tracking 66 holdings within the healthcare equipment space. Notable positions include:

• Inari Medical (NASDAQ: NARI) developed the first mechanical thrombectomy system to receive FDA 510(k) clearance for pulmonary embolism treatment.

• AtriCure (NASDAQ: ATRC) created the first medical device approved by the FDA specifically for persistent atrial fibrillation treatment.

• iRhythm Technologies (NASDAQ: IRTC) integrates wearable biosensors and cloud-based analytics with proprietary algorithms to deliver actionable clinical insights.

Making Your Medical Device ETF Decision

For most investors, the iShares US Medical Devices ETF offers the advantage of significant scale, established track record, and substantial assets. The SPDR alternative appeals to those seeking exposure to smaller, more specialized medical device companies with innovative technologies. Both funds provide structured access to the medical device sector without the complexity of selecting individual stocks.

The choice between them depends on your investment goals, risk tolerance, and preference between broad market exposure versus concentrated innovation plays.