Investors, though, may gain broad exposure to the overall sector and limit their risks to individual holdings through ETF products.
The iShares Nasdaq Biotechnology ETF (NYSEArca: IBB) is the largest biotech ETF, with $2.21 billion in assets and a 0.48% expense ratio. IBB is up 29.0% year-to-date.
The SPDR S&P Biotech ETF (NYSEArca: XBI), with a 0.35% expense ratio, and First Trust Amex Biotech Index Fund (NYSEArca: FBT), with a 0.60% expense ratio, follow an equal-weight methodology that emphasizes mid- and small-cap stocks. As smaller companies have the most to gain in discovering a new breakthrough drug, they will experience larger swings, which have also translated to larger gains in both these equal-weight funds. XBI has gained 35.4% year-to-date and FBT has increased 33.0% year-to-date.
SPDR S&P Biotech ETF
For more information on the biotech sector, visit our biotechnology category.
Max Chen contributed to this article.