Healthcare stocks struggled in 2023, but a late-year rally helped the sector end the year in positive territory. Despite lagging behind tech and growth stocks, healthcare is expected to continue growing at a faster rate than the overall economy due to an aging population and rising healthcare spending. The integration of AI, defensive nature, and steady cash flow make healthcare stocks attractive for investors. Healthcare ETFs, such as S&P 500 Select Sector SPDR for Healthcare (XLV), have also shown strong performance. Astute investors are advised to consider healthcare mutual funds for portfolio diversification, with three recommended options being Janus Henderson Global Life Science (JNGLX), Vanguard Health Care (VGHCX), and Fidelity Select Pharmaceuticals Portfolio (FPHAX). These funds have strong Zacks Mutual Fund Ranks and positive annualized returns.