All About Best-Performing Biotech ETFs

Feb 01, 2023 By Susan Kelly

The Nasdaq Biotechnology Index has recovered more than 25% from its bear market lows on positive clinical trial results, rising earnings, and merger and acquisition activity. Three outperforming biotech ETFs provide exposure to the industry.

Three exchange-traded funds (ETFs) have beaten a significant biotech index and the market over the past year. These are the First Trust NYSE Arca Biotechnology Index Fund, the Invesco Dynamic Biotechnology & Genome ETF, and the VanEck Biotech ETF. The holdings of these ETFs are concentrated on businesses involved in providing biological services and creating and marketing consumer goods based on genetic engineering and analysis.

Over the past year, the top three biotech ETFs have generated higher returns than a significant biotech index and the market. These exchange-traded funds' most significant holdings are in Exact Sciences Corp., Biogen Inc., and Amgen Inc.

Assets Under Management

Excluding inverse and leveraged ETFs and funds with less than $50 million in assets under management, ten biotech ETFs trade in the United States (AUM). As of November 9, the three best ETFs in this group have lost less than the Nasdaq Biotechnology Index's drop of 16% and the S&P 500 Index's decrease of 19% during the previous twelve months.

U.S. corporations have partnered with Chinese companies in research and new medication development areas. Thus sanctions between China and the U.S. could threaten the industry's long-term future despite the recent upswing in biotech equities since June.

Issued By: First Trust

The goal of FBT is to replicate the dollar-for-dollar performance of the NYSE Arca Biotechnology Index, which measures the progress of companies involved in the use of biological processes like recombinant DNA technology, molecular biology, genetic engineering, and genomics to create new medicines and therapies.

Most of the fund's holdings are made up of growth stocks with a wide range of capitalizations. Its top three investments are in molecular diagnostics firm Exact Sciences Corp. (EXAS), mRNA vaccine developer Moderna Inc. (MRNA), and analytics and clinical research services provider IQVIA Holdings Inc. After one year, the Invesco Dynamic Biotechnology & Genome ETF (PBE) lost 9.7 percent of its value.

Amount Spent as a Percentage of Revenue

PBE provides access to enterprises that could make significant technological advances due to recent increases in spending on medical processes. PowerShares has a family of exchange-traded funds (ETFs) called Dynamic ETFs, and PBE is one of them.

The MVIS US Listed Biotech 25 Index, which includes firms engaged in the research, design, manufacturing, and distribution of pharmaceuticals based on genetic analysis and diagnostic equipment, best-performing biotech etfs, was established on December 20, 2011, and is followed by VanEck BBH. More than 90% of the fund's holdings are equities of U.S.-based corporations, most of which are large-cap stocks.

BBH's most significant assets include the biopharmaceutical companies Amgen Inc. (AMGN), which focuses on neurological and cardiovascular illnesses, Gilead Sciences, which was previously mentioned; and Vertex Pharmaceuticals Inc. (VRTX), which is working on medicines for cystic fibrosis.

Expanding Industry

Are you looking to put your money into a promising and expanding industry? The field of biotechnology provides just such a chance. There are hundreds of biotech firms working on new treatments right now. Several of these have the potential to alter how diseases are prevented and treated radically.

Even said, investing in biotech equities does come with one major drawback. Most of them are incredibly hazardous. Rather than buying individual biotech stocks, investing in exchange-traded funds (ETFs) that focus on the sector can help reduce your portfolio's risk and volatility.

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Investing in biotech ETFs Exchange-traded funds (ETFs) are similar to mutual funds in that they can hold a diversified portfolio of companies (and sometimes other assets). However, mutual funds are not freely traded like stocks and can only be purchased through a broker or directly from the issuer.

The expense of purchasing an ETF goes beyond the commission that a stockbroker may demand. Fees are used by the funds to offset their overhead. ETF expenses are a percentage of average assets or the expense ratio.

To sum up, biotech ETFs share all the qualities of traditional exchange-traded funds. The primary distinction is that these ETFs invest solely in biotechnology-related firms.

Best exchange-traded funds (ETFs) for biotechnology in 2023 There is a general trend where the largest biotech ETFs are the best ones to invest in. Their expense ratios are minimal in comparison to their total assets under management. You can buy five top biotech exchange-traded funds (ETFs) now.

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