This is a passive ETF that tracks the Dow Jones U.S. Select Medical Equipment Index, giving concentrated exposure to U.S.-listed medical device companies. It covers a wide range of medical device subsectors, including surgical robots, cardiovascular devices, in vitro diagnostics and orthopedic implants.

It is suited to investors who want to focus on the medical device segment within the healthcare sector.

Launched by BlackRock (iShares) in 2006, it is managed passively, tracking an index.

The fund holds U.S. medical device companies on a market-cap-weighted basis to track the index's performance. Concentration in its top holdings is relatively high, and high-growth subsectors such as surgical assistance systems, cardiovascular devices and continuous glucose monitors form the core of the portfolio.

• Pure, concentrated exposure to the U.S. medical device sector
• Includes high-growth subsectors such as surgical robots and diagnostic devices

Assets under management (AUM) stand at $4.2B, and the expense ratio is 0.37% per year.

Because it focuses only on medical devices, unlike broad healthcare ETFs, it is often used to adjust sector exposure within a portfolio.

The U.S. medical device industry has maintained a long-term upward trend, backed by population aging and rising demand for healthcare. During periods of rising interest rates, richly valued growth-style stocks have at times corrected, but large, earnings-driven medical device companies tend to provide stability.

The medical device sector combines defensive and growth characteristics, so capital inflows sometimes appear during periods of economic uncertainty. However, short-term fund flows can be affected by U.S. Food and Drug Administration approval schedules and pricing regulation issues.

Its strengths are targeted medical device exposure and a long-term demand structure, while its weaknesses are the volatility that comes with sector concentration and a somewhat high expense ratio.

XLV, shown in the table, is a broad ETF covering the entire healthcare sector, including pharmaceuticals and biotech in addition to medical devices. VHT and FHLC are similarly low-cost alternatives that track healthcare broadly. For a narrower focus on medical devices, IHI is the option, while those seeking diversification across healthcare can choose XLV, VHT or FHLC. Investors seeking biotech exposure can also compare XBI.

Here are the key items to review before investing in IHI. Because the fund is concentrated in the medical device sector, it is important to thoroughly check its expense level, holdings concentration, regulatory risk and currency impact in advance.

Volatility from concentration in the single medical device sector is greater than for broad healthcare ETFs. Changes in U.S. Food and Drug Administration policy or adjustments to medical insurance reimbursement rates could affect the entire portfolio.

This sector-focused ETF suits investors who want to bet on the long-term growth of the U.S. medical device industry. For diversification across healthcare, XLV or VHT is more suitable, while IHI fits those who want pure medical device exposure.