7 Best Biotech ETFs to Buy

While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. ETFs like VOO own companies in all eleven sectors and provide investors with diversification to lock in long-term returns. Risk-seeking investors bullish on biotech long-term might find this ETF attractive but may find better risk-to-reward ratios backing individual companies seeking drug approvals. This modified equal-weighted index provides exposure to large, mid, and small-cap stocks in the biotech ecosystem. Actively managed ETFs are run by portfolio managers who actively make investment decisions to outperform the market or achieve a specific investment objective. An actively managed ETF has a specific investment strategy outlined in its prospectus, and the managers use their expertise and research to make investment decisions based on this strategy.

That is expected to jump to 19.3% per year over the next five years, but with one caveat. Analysts are expecting EPS to drop by about half in 2023—compared to 2022 levels. Although the growth over the next half decade will hopefully get the company back to, or above, current profit levels. The stock has been trending lower for much of 2023 and has been relatively flat since 2016.

• You may want to be more cautious if the fund has experienced sharp downturns that stand out from market downturns during the same time frame.
• Still, if you believe in the genomics field, this could be one of the best biotech ETFs to buy.
• It has performed well over the past three years, and has $5.5 billion in assets, making it one of the larger funds on this list.
• SCHD outperformed its Morningstar large-cap value fund category during the previous three-, five- and 10-year periods.

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However, analysts are expecting that to change, projecting $0.07 per share in 2023 and $0.30 in 2024. Sales are expected to rise 13.1% next year, which is a significant improvement over the small sales growth in recent years. Halozyme develops cancer therapies and licenses its drug delivery technology to other leading pharmaceutical companies.

Click on the tabs below to see more information on Biotechnology ETFs, including historical performance, dividends, holdings, expense ratios, technical indicators, analysts reports and more. Click on an ETF ticker or name to go to its detail page, for in-depth news, financial data and graphs. By default the list is ordered by descending total market capitalization. Note that ETFs are usually tagged by ETF Database analysts as more than one type; for example, an inverse gold ETF may be tagged as “inverse” and as “gold” and as “commodity”.

Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal. While the biotech industry is extremely volatile, IBB consists of the largest and most established biotech companies on the market, which tend to be less volatile relative to smaller ones in the sector.

Fund Size and Liquidity

It gives investors exposure to large-cap, mid-cap, and small-cap biotech stocks. There’s one big downside to investing in biotech stocks, though. The good news is that you can https://1investing.in/ lower your risk level and portfolio volatility by investing in exchange-traded funds (ETFs) that focus on the biotech sector instead of buying individual biotech stocks.

Biotechnology is such an exciting industry to explore, and the possibilities are truly endless. The astonishing breakthroughs of the last decade suggest we’re still very early to the game. Investors looking for more of a pure-play AI investment may also consider Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ) and Ark Industrial Innovation ETF (ARKQ). We think of GNOM as “ARKG-adjacent” because it has a similar approach to betting on innovation within the biotech space and holds many of the same companies. Investors can expect less volatility when choosing the VanEck Vectors Biotech ETF relative to other funds in this article.

Investors can own shares in such ETFs to easily invest in a diversified biotech portfolio. The biotech industry’s trading patterns are unstable and investors need to be prepared to commit to the sector for the examples of substitute goods long term. These companies create drugs and treatments for some of the biggest medical problems of our time. The key difference is that these ETFs hold only the stocks of companies that focus on biotechnology.

ETF Fund Flows

As such, it should be noted that this page may include ETFs from multiple ETF Database Categories. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk including the possible loss of principal.

Moreover, their average price target stands at $50.37, implying over 74% growth potential. However, one factor to consider for ARKG focuses on its expense ratio. According to TipRanks, Wall Street analysts peg XBI as a consensus moderate buy. Further, their average price target stands at $143.11, implying 81% upside potential.

Sean is interested in the people and technologies that are improving the world. It tracks some of the world’s best technology companies and has delivered phenomenal returns over the past decade. This includes the smaller, more risky drug manufacturers who can see their share price rise or fall dramatically depending on approvals (or rejections) from the FDA. The fund invests in companies that are expected to substantially benefit from extending and enhancing human life quality via advancements made in genomic technology. Ninety-five percent of the bonds land in the A and BBB rating categories, which are investment grade. Over the next several years, it’s likely that interest rates will plateau or decline, lifting bond prices.

ETF Holdings

However, it has just $165 million under management, which is the smallest amount of any fund on this list. Investors may be concerned about liquidity when buying and selling shares. The smaller a fund is, the fewer investors will be looking to buy or sell shares at any one time.

IBB consists of stable biotechs that have built the capital to fend off such attacks and drive innovation in their own respects. IBB invests in many of the industry-leading companies that ARKG is trying to disrupt. The biotech industry is poised to be one of the biggest winners of the next decade. This article identifies the six best biotech ETFs on the market.

According to TipRanks, covering analysts peg IBB as a consensus moderate buy. In addition, their average price target stands at $173.08, implying over 36% capital growth potential. Therefore, IBB makes an interesting case for the best biotech ETFs to buy. Funds with more assets can cover more ground and typically have lower expense ratios. Large funds with frequent trading activity are also easier to exit if you want to get out of the position. Low-liquidity funds present fewer opportunities for an exit, and you may have to settle with a selling price well below the market price.

About three-quarters of VXUS is at work in stocks based in developed markets. Picking the right biotech stocks means the difference between treading water and impressive outperformance. To help you get the latter for your portfolio, Forbes Advisor has identified 10 of the best biotech stocks. These companies have growing revenue and strong forward growth expectations. Biotech ETFs each give investors exposure to biotech companies, but a few factors can impact your total returns.

Where to Invest in Biotech ETFs

Yet AVUV’s 3 year average annual performance is roughly half again bigger than its Morningstar small-cap value category’s. 2023 is anticipated to see five patent expirations for well-established biologic products, resulting in a significant loss of revenue. Furthermore, over 20 products, accounting for nearly $200 billion in annual sales, are expected to lose patent protection by 2030. The US Food and Drug Administration (FDA) experienced a decline in approvals for new molecular entities and biologics license applications in 2022, which was attributed to staffing shortages. However, approvals returned to pre-pandemic levels in Q1 of 2023.

Like most ARK Invest ETFs, ARKG is a high-risk, high-reward fund, even for biotech standards. The fund is down by more than 70% from its all-time high but also more than quadrupled from its pandemic low to its February 2021 all-time high. The fund has a 20.76% year-to-date return and a 0.75% expense ratio. The fund’s top three holdings are Exact Sciences (10.85%), Schrodinger (7.73%) and Pacific Biosciences of California (6.20%).

However, its active management leads to a high management fee compared with some alternatives. The fund’s expense ratio is 0.75%, equivalent to $7.50 for every $1,000 invested. The Ark Genomic Revolution ETF (ARKG -0.63%) is one of several exchange-traded funds operated by Cathie Wood’s Ark Invest. The fund invests in the stocks of companies that incorporate genomics into their businesses.

Biotech exchange-traded funds let you invest in a basket of health care companies through a single investment. This fund tracks an index of U.S.-listed providers of health care, including UnitedHealth, CVS Health and Elevance Health. Finally, it’s worth noting that larger ETFs tend to charge lower expense ratios, because they can spread the costs of running the fund across more assets.

Since its inception in 2001, the ETF has delivered an average annualized total return of 6.6%. Over the past five years, it has generated an annualized total return of about 4.5%. In the last 12 months, for instance, this Invesco fund has surged 28% – much better than two of the biggest biotech ETFs IBB and XBI, both of which are «only» up about 16% in the same period.