How Do I Improve the Return on a Health Care Investment?

An investment in health care can come in many different forms. Some are relatively conservative, such as municipal bonds that finance hospital construction, while others, such as investments in startups, are much more aggressive and can offer higher returns to compensate for their higher risk. The way in which you invest your money can also impact the return on your investment. You can also look to increase the returns on the money you invest in your personal health, reducing bills and potentially freeing up more money to invest elsewhere.

Health Care Investment Types

The actual health care investment you make can have a significant impact on your return. Typically, conservative fixed-income investments, such as bonds issued by blue-chip health care companies or highly-rated municipal bonds that finance the construction of community health care facilities, will offer the most stability, but the least return. Stock in major health care companies, such as medical equipment or pharmaceutical manufacturers, can offer higher returns. You can also increase your return --- and your risk -- by investing in smaller or start-up health care firms, whether they be biotechnology companies or small pharmaceutical producers.

Leverage

If the health care investments you purchase are eligible for leverage, it can also be a way to increase returns. By investing with other people's money, you are able to gain all of the benefits of growth in value for yourself in exchange for agreeing to pay back the funds with interest. For example, if you use $10,000 of borrowed money to buy stock in a health care company that goes up to $15,000, you will have to pay back the $10,000, but you get to keep the $5,000. Even if you pay 10 percent interest -- $1,000 -- you still get to keep the remaining $4,000 even though you never invested your own money. The risk with leverage is that you also have to pay back the $10,000 even if the investment loses value.

Diversification

Diversifying your health care investments generally improves your return. If you put all of your money into a single company and it does well, you could earn a windfall, but if it doesn't, you could lose everything. With a diversified portfolio of investments, you get little pieces of many different companies or bonds in the hope that those that go down in value get cancelled out by those that go up, leaving you with a return that approximates the market as a whole. Diversification can be particularly worthwhile if you choose to invest in smaller and riskier companies because the chance of one failing -- and the cost of a bad choice -- is greater.

Improving Returns on Your Health Care

Given that for many people, health care is a major expense, striving for a positive return on investment on their personal care costs can also yield real returns. Containing costs by selecting the right insurance carrier and comparison shopping for medical services and products can help because savings go right into your pocket. In addition, taking good care of yourself can also help reduce medical costs down the line. For instance, having a diagnostic test done that detects a condition while it can be cured with medication instead of surgery could save you thousands of dollars in deductibles and co-pays. The return on that investment may dwarf what you can accomplish in the financial markets.

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About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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