US Healthcare Innovation: Navigate Medical Device ETFs for 2025 Growth

Understanding Medical Device ETFs in the U.S. for 2025

The U.S. healthcare industry remains one of the most dynamic and innovation-driven sectors in the global economy. With an aging population, rising chronic disease prevalence, and continuous breakthroughs in medical technology, demand for advanced healthcare solutions shows no signs of slowing. For American investors aiming to tap into this long-term growth without the volatility of picking individual stocks, medical device exchange-traded funds (ETFs) offer a strategic and accessible solution. These funds provide diversified exposure to companies at the forefront of surgical robotics, diagnostics, wearable health monitors, and life-saving implants-critical components of modern medicine. As we approach 2025, integrating medical device ETFs into a well-balanced portfolio can position investors to benefit from both demographic tailwinds and technological disruption shaping the future of care.

How Medical Device ETFs Work: A Clear Breakdown

Exchange-traded funds (ETFs) are investment vehicles that trade on major stock exchanges like individual stocks but hold a basket of underlying assets-typically equities. Medical device ETFs focus specifically on publicly traded companies involved in the research, development, manufacturing, and distribution of medical equipment and diagnostic tools. When you invest in one of these ETFs, you’re gaining fractional ownership in dozens of firms across the medtech ecosystem, from cardiovascular device makers to innovators in digital health and minimally invasive surgery.

This structure delivers instant diversification. Instead of betting on a single company’s next product launch or FDA approval, your investment spreads risk across multiple players. For instance, a top medical device ETF might include industry leaders such as Medtronic-known for pacemakers and insulin pumps-Intuitive Surgical, the pioneer behind the da Vinci robotic surgery system, and Abbott Laboratories, which develops everything from glucose monitors to heart stents. Because ETFs trade like stocks, investors can buy and sell shares throughout the trading day at market prices, offering flexibility, transparency, and liquidity not always available with mutual funds.

Why U.S. Investors Should Consider Medical Device ETFs in 2025

As healthcare innovation accelerates in the United States, medical device ETFs are emerging as a compelling long-term investment vehicle. Here’s why they deserve a spot in a forward-looking portfolio:

Diversified Exposure to a Resilient Sector
Healthcare is often considered defensive, meaning it tends to hold up better than other industries during economic downturns. People need medical care regardless of market conditions, and essential devices-from surgical tools to diagnostic imaging machines-remain in steady demand. By investing in a medical device ETF, you gain broad exposure to this stability without putting all your capital behind one company.

Long-Term Growth Driven by Demographics and Innovation
The U.S. population is aging rapidly. By 2030, over 20% of Americans will be 65 or older-a demographic that consumes significantly more healthcare services. This shift drives demand for joint replacements, cardiac devices, and chronic disease management tools. At the same time, rapid advancements in artificial intelligence, robotics, and remote monitoring are fueling new product cycles and expanding market opportunities. According to Grand View Research, the global medical device market is projected to grow at a compound annual rate of over 5%, reaching nearly $800 billion by 2030. Source 1

Access Without the Research Burden
Building a diversified portfolio of individual medtech stocks requires deep sector knowledge, constant monitoring of regulatory news, and insight into clinical trial outcomes. ETFs remove much of that complexity. Fund managers handle the selection process, rebalancing holdings based on index criteria or performance metrics, so investors can gain exposure with a single transaction.

Liquidity and Trading Flexibility
Most medical device ETFs trade on major U.S. exchanges like the NYSE or Nasdaq. This means investors can enter or exit positions during regular market hours at real-time prices, unlike mutual funds that settle only once per day.

Exposure to Cutting-Edge Technologies
From AI-powered radiology platforms to implantable sensors that transmit data to smartphones, today’s medical devices are smarter and more connected than ever. ETFs focused on this sector allow investors to participate in innovations that were once science fiction, including personalized treatment plans enabled by real-time biometrics and robotic systems enhancing surgical precision.

Key Risks and Challenges for U.S. Investors

While the growth outlook is strong, medical device ETFs come with unique risks that investors should weigh carefully.

Market and Economic Volatility
Even defensive sectors aren’t immune to broad market swings. Rising interest rates, inflation, and geopolitical uncertainty can lead to equity sell-offs, impacting ETF valuations even if fundamentals remain sound.

Regulatory Hurdles and FDA Scrutiny
The U.S. Food and Drug Administration (FDA) plays a pivotal role in determining which devices reach the market. Delays in approvals, unexpected clinical trial setbacks, or shifts in regulatory policy can hurt company valuations overnight. Additionally, changes to Medicare reimbursement rules or healthcare legislation-such as potential updates to the Affordable Care Act-can affect pricing power and profitability across the sector.

Technological Disruption and Obsolescence
Innovation is a double-edged sword. While it drives growth, it also renders older technologies obsolete. A company leading in pacemaker design today could lose ground tomorrow to a rival offering AI-integrated models with predictive analytics. The need for continuous R&D investment means margins can fluctuate, especially among smaller innovators.

Interest Rate Sensitivity
Many medical device firms rely on debt financing for research, clinical trials, and scaling production. When interest rates rise, borrowing becomes more expensive, potentially slowing innovation timelines and reducing profit margins-factors that ultimately influence stock prices within an ETF.

Sector Concentration Risk
Even though ETFs diversify across companies, they remain concentrated in one industry. If the entire medical device sector faces headwinds-such as a wave of regulatory crackdowns or supply chain disruptions-the entire ETF could underperform. For balanced risk management, these funds should complement, not dominate, a diversified portfolio.

Top Medical Device ETFs for U.S. Investors in 2025

For investors seeking targeted exposure to the U.S. medtech space, several ETFs stand out due to their focus, size, and performance history. Below is a comparison of leading options available to American investors.

Note: Expense ratios and assets under management (AUM) are subject to change. Always verify current data directly from the fund provider.

iShares U.S. Medical Devices ETF (IHI)
IHI is the largest and most widely held ETF dedicated exclusively to U.S.-listed medical device companies. It tracks the Dow Jones U.S. Select Medical Equipment Index, which includes manufacturers and distributors of equipment used in diagnostics, surgical procedures, and patient monitoring. With top holdings like Abbott, Medtronic, and Intuitive Surgical, IHI offers concentrated exposure to industry titans. Its low expense ratio and deep liquidity make it a go-to choice for long-term investors. Source 2

SPDR S&P Health Care Equipment ETF (XHE)
XHE follows the S&P Health Care Equipment Select Industry Index and provides exposure to a slightly different mix of companies compared to IHI. While there’s overlap in major names, XHE uses a modified equal-weighting approach, giving smaller and mid-cap innovators a larger role. This can lead to higher volatility but also greater upside during growth cycles. Its lower expense ratio and solid track record appeal to investors looking for a complementary play on medtech.

Broader Healthcare ETFs with MedTech Exposure
For those who want medical device exposure within a wider healthcare context, funds like the Health Care Select Sector SPDR Fund (XLV) or Vanguard Health Care ETF (VHT) include significant allocations to device makers alongside pharmaceutical and biotech firms. Similarly, the VanEck Vectors Biotech ETF (BBH) focuses on biotech but occasionally includes companies with medtech divisions. These options suit investors prioritizing overall healthcare exposure rather than pure-play device bets.

How to Pick the Right Medical Device ETF for Your Portfolio

Choosing the best ETF isn’t just about performance-it’s about alignment with your financial goals, risk profile, and investment timeline. Consider these factors before making a decision:

Expense Ratio
Even small differences in fees compound over time. A 0.05% lower expense ratio can save thousands in costs over a decade. Compare IHI’s 0.40% with XHE’s 0.35% to see how savings add up.

Index Methodology
Understand how the ETF selects and weights its holdings. Market-cap weighted funds like IHI give more influence to large companies, while equal-weighted or sector-focused indexes may offer more balanced exposure.

Holding Composition
Review the top 10 holdings. Are they leaders in high-growth niches like surgical robotics, diabetes management, or neurostimulation? Do they align with your outlook on where innovation is headed?

Performance Across Market Cycles
Look beyond recent returns. How did the ETF perform during the 2020 pandemic surge, the 2022 rate hike cycle, or prior market corrections? Consistent behavior in downturns and upswings signals resilience.

Liquidity and Trading Volume
High average daily volume ensures you can buy or sell shares without large price slippage. IHI averages over 1 million shares traded per day, making it highly liquid.

Assets Under Management (AUM)
Larger AUM often indicates investor confidence and operational stability. ETFs with less than $100 million in assets may face closure risk, though IHI and XHE are well above that threshold.

U.S. Market Focus
Ensure the ETF primarily holds U.S.-domiciled companies or firms with substantial U.S. revenue. This aligns with the domestic innovation theme and reduces currency and geopolitical risks.

Future Trends Shaping Medical Devices and ETFs in 2025 and Beyond

The medtech landscape is evolving faster than ever, and investors who understand these shifts will be better positioned to capitalize on them.

AI and Robotics Integration
Artificial intelligence is transforming diagnostics, enabling earlier detection of cancers and neurological conditions through pattern recognition in imaging data. Robotic-assisted surgery systems are becoming more precise, reducing recovery times and complications. Companies investing in AI-driven platforms are likely to lead the next wave of innovation-and ETFs that include them could see outsized gains.

Personalized and Precision Medicine
Genomic testing and wearable biosensors now allow for treatments tailored to individual patients. Devices that monitor blood glucose, heart rhythm, or respiratory function in real time are creating continuous data streams that inform care decisions. This trend is expanding the definition of what a “medical device” can be.

Telehealth and Remote Patient Monitoring
The telehealth boom has created demand for home-based monitoring tools. From ECG patches to smart inhalers, these devices enable chronic disease management outside hospitals. Regulatory support and insurance reimbursement for remote care are accelerating adoption.

Demographic Tailwinds
The aging Baby Boomer generation is driving sustained demand for orthopedic implants, cardiovascular devices, and vision correction technologies. Chronic conditions like diabetes and heart disease are rising, fueling innovation in implantable monitors and automated insulin delivery systems.

Regulatory and Supply Chain Evolution
Post-pandemic, companies are reshoring production and diversifying supply chains to avoid disruptions. The FDA is also modernizing its approval pathways for software-based and AI-enabled devices, which could speed time-to-market for digital health tools.

ESG and Sustainable Innovation
Environmental, social, and governance (ESG) factors are increasingly important. Investors favor companies with ethical manufacturing practices, reduced environmental impact, and strong patient safety records. ETFs incorporating ESG screening may attract more institutional capital in the coming years.

Choosing a U.S.-Friendly Broker for ETF and Portfolio Access in 2025

To invest in medical device ETFs, you’ll need a brokerage account that offers access to U.S. exchange-listed securities. While traditional platforms like Fidelity, Charles Schwab, and Vanguard dominate the retail space, some investors seek broader global exposure or advanced trading tools-especially for hedging or international diversification.

Here’s how a few top brokers compare, including Moneta Markets, which serves investors looking to expand beyond standard ETF access.

While Moneta Markets does not facilitate direct purchases of U.S.-listed ETFs like IHI or XHE due to regulatory limitations, it excels in offering forex, CFDs, and advanced trading platforms (MT4/MT5) for global markets. U.S. investors can use Moneta Markets to diversify into international equities, commodities, or currency pairs-strategies that can hedge domestic exposure or enhance portfolio performance. Its FCA licensing ensures a high standard of compliance and client protection, making it a trustworthy option for sophisticated traders.

Final Thoughts: Building a Smarter Portfolio with Medical Device ETFs in 2025

Medical device ETFs represent a powerful way for U.S. investors to participate in one of the most innovative and essential sectors of the economy. With aging demographics, rising healthcare spending, and rapid technological change, the demand for advanced medical equipment is only expected to grow. Funds like IHI and XHE offer diversified, liquid, and cost-effective access to companies leading this transformation.

However, success requires more than just picking a ticker. Investors must understand the risks-from regulatory shifts to technological disruption-and ensure these ETFs fit within a broader, balanced portfolio strategy. Pairing domestic ETF exposure with global trading opportunities through platforms like Moneta Markets can further enhance diversification, especially for those interested in currency hedging or international market access.

As we move into 2025, the convergence of AI, robotics, and personalized care will redefine what’s possible in medicine-and in investing. By staying informed, choosing the right tools, and partnering with reliable brokers, U.S. investors can build resilient portfolios poised to benefit from the next era of medical innovation.

What is the best medical device ETF for US investors?

The “best” medical device ETF depends on an individual investor’s risk tolerance, investment goals, and specific exposure preferences. However, the iShares U.S. Medical Devices ETF (IHI) and the SPDR S&P Health Care Equipment ETF (XHE) are consistently among the top contenders due to their focused exposure, liquidity, and strong track records. Always review their current holdings, expense ratios, and performance history before making a decision.

Are medical device ETFs a good investment in 2025?

Generally, medical device ETFs are considered a potentially good investment for 2025 due to several tailwinds: an aging global population, increasing healthcare spending, and rapid technological advancements (e.g., AI, robotics). While they offer significant growth potential, they also carry risks such as regulatory changes and market volatility. As with any investment, it’s essential to perform due diligence and align it with your overall portfolio strategy.

What is the iShares U.S. Medical Devices ETF (IHI)?

The iShares U.S. Medical Devices ETF (IHI) is a prominent exchange-traded fund that aims to track the performance of the Dow Jones U.S. Select Medical Equipment Index. It provides targeted exposure to US companies that primarily manufacture and distribute medical devices, making it a popular choice for investors seeking direct access to this specialized healthcare segment.

Can I invest in healthcare through other ETFs besides medical devices?

Yes, absolutely. You can invest in healthcare through a variety of other ETFs that offer broader exposure. These include general healthcare sector ETFs (e.g., Health Care Select Sector SPDR Fund – XLV, Vanguard Health Care ETF – VHT), biotechnology ETFs (e.g., iShares Biotechnology ETF – IBB, VanEck Vectors Biotech ETF – BBH), or pharmaceutical ETFs. These options allow for wider diversification across different sub-sectors of the healthcare industry.

What are the top 10 healthcare ETFs for US investors?

While providing a definitive “top 10” can be subjective and change, some highly regarded healthcare ETFs for US investors include: XLV (Health Care Select Sector SPDR Fund), VHT (Vanguard Health Care ETF), IBB (iShares Biotechnology ETF), IHI (iShares U.S. Medical Devices ETF), XHE (SPDR S&P Health Care Equipment ETF), FBT (First Trust Amex Biotechnology Index), and PJP (Invesco Dynamic Pharmaceuticals ETF). The best choice depends on your desired level of sub-sector exposure within healthcare.

Do healthcare ETFs offer dividends?

Many healthcare ETFs do offer dividends. The dividend payout depends on the underlying holdings of the ETF. If the companies within the ETF pay dividends, the ETF typically passes those dividends on to its investors, usually on a quarterly basis. Investors interested in income generation should check the dividend yield and distribution history of specific healthcare ETFs.

How do I buy a medical device ETF in the United States?

To buy a medical device ETF in the United States, you’ll need to open an investment account with a brokerage firm. Once your account is funded, you can search for the ETF by its ticker symbol (e.g., IHI or XHE) and place a buy order, similar to how you would purchase individual stocks. Traditional US-regulated stockbrokers like Fidelity, Charles Schwab, or TD Ameritrade are commonly used for direct ETF investments.

What is the difference between biotech and medical device ETFs?

The key difference lies in their focus. Biotechnology ETFs concentrate on companies involved in research, development, and manufacturing of drugs and therapies derived from biological processes (e.g., gene therapy, vaccines). Medical device ETFs, on the other hand, focus on companies that produce equipment, instruments, diagnostics, and supplies used in healthcare, such as surgical robots, MRI machines, and pacemakers. While there can be some overlap, they target distinct segments of the healthcare innovation landscape.

Can Moneta Markets help me diversify my portfolio to include exposure to medical device ETFs and other global assets?

For direct investment in US-listed medical device ETFs, traditional US-regulated stockbrokers are typically used. However, Moneta Markets can significantly help diversify your overall investment portfolio by providing access to a wide range of global trading opportunities, including forex and CFDs on various assets. If you’re looking to complement your medical device ETF holdings with international market exposure, hedging strategies, or advanced trading tools for non-US assets, Moneta Markets offers competitive spreads and robust MT4/MT5 platforms, making it an excellent choice for a broader, diversified investment strategy. Moneta Markets holds an FCA license, ensuring strong regulatory oversight for investor protection.