The biotech industry is full of opportunity for investors looking for growth – and this isn’t just for investors who are comfortable with taking on big risk. Sure, there are plenty of skewered companies and opportunities that have the potential to yield massive returns, but savvy investors know there are more dependable routes to nice returns.
One route is exchange traded funds, or ETFs. ETFs come with less risk than investing in individual stocks, but they still hold the possiblity of premium returns. For biotech investors, this might mean more stability and fewer worries, since biotech ETFs tend to follow a wide range of stocks, providing a cushion for any individual stocks that may not be delivering.
So, with that in mind, here are five small biotech ETFs to consider for your portfolio.
First off, the iShares Nasdaq Biotechnology ETF (IBB) may be the go-to choice for those looking for a truly diverse fund. This ETF focuses on large and mid-cap biotech companies, and is listed at the Nasdaq exchange. The IBB also has some of the lowest expense ratios in comparison to other biotech ETFs, making it attractive to budget-conscious investors.
The SPDR S&P Biotech ETF (XBI) is another popular choice, and is the next largest after IBB. Like the IBB, XBI focuses on both large and mid-cap biotech stocks, but with somewhat of a lean towards mid-cap picks. The expense ratio is also low, and some have even said that XBI is the better pick when it comes to overall performance.
Those looking for a unique, smaller pick may appreciate the Catalyst Health Care/Pharmaceutical ETF (HCR). This is a rather unique fund that focuses on pharmaceutical companies, biopharmaceuticals, specialty pharmaceuticals, and medical devices and equipment. The expense ratio is reasonable and allows for some diverisification.
Those looking for a more international approach may like the First Trust NYSE Arca Biotechnology Index Fund (FBT). This ETF focuses more heavily on mid-cap and some international picks, as well as a few large-cap selections. This fund trades on the NYSE Arca exchange, and has an expense ratio that is comparable to that of IBB and XBI. Finally, those looking for a very diverse ETF should consider the Invesco Dynamic Biotech & Genome ETF (PBE). This ETF is not for the faint of heart but could be ideal for investors who are willing to take a gamble. PBE covers both large and smaller caps in the biotech sector and also covers some international companies. The expense ratio is also competitive with the other big players.
The biotech industry can be a real rollercoaster, but for investors who choose carefully, there is always the potential for nice returns. ETFs provide a safe entry point for these investors to get in on the action. Above are some of the top picks in the small biotech ETF category – including some of the more diverse funds. Do your research and you can find the right ETF to fit your particular investing profile.