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5 Best Biotech ETFs to Buy in Q1 2025
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Biotechnology is an important and innovative sector of the market. The potential for growth entices investors because if a biotech company’s plans hit fruition, investors stand to gain record returns. This page offers our experts’ selection of the best biotech ETFs on the market today.
What are the top biotech ETFs to buy?
Copy link to sectionOur analysts have selected five of the best biotech ETFs for this year as displayed in the table below. Continue scrolling further to learn more about each ETF in turn.
# | ETF symbol | ETF name | Learn more |
---|---|---|---|
1 | IBB | iShares Biotechnology ETF | Learn more > |
2 | XBI | SPDR S&P Biotech ETF | Learn more > |
3 | ARKG | ARK Genomic Revolution ETF | Learn more > |
4 | BBH | VanEck Biotech ETF | Learn more > |
5 | PBE | Invesco Dynamic Biotechnology & Genome ETF | Learn more > |
1. iShares Biotechnology ETF (IBB)
Copy link to section- Assets: $7.35 billion
- Expense ratio: 0.45%
- Year of inception: 2001
- 5-year performance: 25%
- Dividend yield: 0.30%
IBB is a fund that seeks to align with the yield and performance of a modified market-cap-weighted index that comprises US biotechnology companies listed on US exchanges. The fund currently has 377 holdings in companies that focus on the research and development of therapeutic treatments.
Despite a downturn in growth of 6% in the previous year of the pandemic, IBB has grown 25% in the last five years as demand for biotech companies and mergers and acquisition (M&A) continued.
The fund holds 220 companies, with the top ten of them accounting for 52% of the fund. Some of the biggest companies in the fund being the likes of Vertex Pharmaceuticals, Amgen, Regeneron Pharmaceuticals, and Moderna. Other top companies in the fund are Biogen, BioNTech, and IQVIA.
It has a P/E ratio of 23, making it a bit expensive than the S&P 500 index, which has a multiple of 21.
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2. SPDR S&P Biotech ETF (XBI)
Copy link to section- Assets: $7.13 billion
- Expense ratio: 0.35%
- Year of inception: 2006
- 5-year performance: 6.2%
- Dividend yield: 0.14%
The SPDR S&P Biotech ETF is made up of the 142 biggest biotech companies in the US. Its top ten of them account for about 29% of the entire fund, making it a fairly balanced fund.
The biggest companies in the fund are Serepta Therapeutics, United Therapeutics, Alnylam Pharmaceuticals, Exact Sciences, and Gilead Sciences. It does that by tracking the S&P Biotechnology Select Industry index, which is made up of large, mid, and small-cap stocks.
The XBI ETF average annual returns since inception are about 9.5%, which is a few points below the S&P 500 annual return of over 10%. It is also more expensive than most S&P 500 funds, which have an expense ratio of less than 0.20%.
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3. ARK Genomic Revolution ETF (ARKG)
Copy link to section- Assets: $1.28 billion
- Expense ratio: 0.75%
- Year of inception: 2014
- 5-year performance: -31%
- Dividend yield: N/A
ARKG is an actively managed fund that aims for long-term capital growth by investing in US and global securities. It currently has 43 holdings in companies across multiple sectors that relate to the fund’s investment theme of genomics revolutions. These sectors are healthcare, energy, information technology, consumer discretionary, and materials.
Its niche theme is based on the hope that the companies it holds shall substantially grow from their technological and scientific developments in genomics. This poses substantial niche risk for investors and you must be bullish on ARKG’s theme to invest for the long run. Furthermore, with only 55 holdings, investors must also consider specific-holding risk when investing in ARKG.
The main risk for the ARKG ETF is that it has a long history of underperformance and is more expensive than the other ETFs. A 0.75% expense ratio is highly expensive, especially for a fund that regularly underperforms the market.
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4. VanEck Biotech ETF (BBH)
Copy link to section- Assets: $433 million
- Expense ratio: 0.35%
- Year of inception: 2011
- 5-year performance: 31%
- Dividend yield: 0.42%
BBH seeks to replicate the MVIS US Listed Biotech 25 Index. The index tracks the performance of companies involved in the development and production, marketing and sales of drugs related to genetic analysis and diagnostic equipment.
The fund has 25 holdings, as per the Index. It focuses on the largest and most liquid companies in the biotech industry like Amgen, Vertex Pharmaceuticals, Regeneron, and Gilead Sciences.. Furthermore, holding the biggest US and global names means that BBH allows for enhanced industry representation.
This makes the fund a solid bet for investors looking to invest for the long run. Established names in the biotech industry can often carry the industry, and if you are interested in biotech then BBH may prove a value-add for your portfolio. It is also one of the cheapest biotech ETFs to invest in with its 0.35% expense ratio.
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5. Invesco Dynamic Biotechnology & Genome ETF (PBE)
Copy link to section- Assets: $257 million
- Expense ratio: 0.58%
- Year of inception: 2005
- 5-year performance: 21%
- Dividend yield: 0.05%
PBE is a fund that is based on the Dynamic Biotech & Genome Intellidex Index. It currently has 30 holdings in US biotechnology and genome companies. These companies are focused on the research, development, production, and sales of products, services, and processes that focus on advances in biotech research and genetic engineering.
The fund has grown 10% since it started out in 2005. PBE benefits from even asset allocation across its holdings which allows for hedging against specific-holding risk despite the small number of holdings. This is beneficial to investors opting for a passive style of long term investment.
The fund is made up of some well-known and other niche companies in the biotech industry. Some of the most notable names in the fund are the likes of Biomarin, Regeneron, Gilead Sciences, and Illumina. It is a more concentrated fund with the top ten holdings accounting for almost 50% of the fund.
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Where to buy the best biotech ETFs
Copy link to sectionChoosing an online ETF platform is the first step to buy any of the above exchange-traded funds for the biotech industry. ETFs are like individual stocks, you can buy or sell them as is convenient. The table below features our preference of the best brokers that offer biotech ETFs.
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What is a biotech ETF?
Copy link to sectionIt’s an exchange traded fund that holds shares in companies that operate in the biotech industry. Companies in this sector focus on the development of novelty drugs and advancements in clinical research to treat medical conditions and diseases.
Biotechnology is an innovative and disruptive sector due to the speculative growth nature of the products and services on offer. As a result, biotech ETFs are often risky investments and intended for more active investors.
Are biotech ETFs a good investment?
Copy link to sectionWith high risk comes high rewards. Biotech companies are disruptive, innovative, and have untapped potential for growth. This means that ETFs holding these company stocks carry more risk than ETFs focused on other relatively stable industries.
Biotech ETFs are intended for more active investors with higher risk appetites. You must be able to cope with risk in the long term and not expect instant returns on your investment if you want to invest in biotech ETFs.
With the ongoing pandemic, the biotech industry is more prevalent than ever before. Unlike other industries, biotech is able to carry the pandemic in its stride (for example, through companies that focus on new drug development). The best tech ETFs may be another area of interest for investors with lower risk aversion who want to enter the biotech sector.
You should best place your investment by doing your own due diligence and staying on top of the news using the links below.
Methodology: How we choose the best biotech ETFs
Copy link to sectionAt Invezz, we are dedicated to helping investors make informed decisions by providing authoritative, accessible, and engaging advice and recommendations. Our curated section of the best Exchange-Traded Funds (ETFs) is carefully selected by our team of experienced market analysts and reviewed by a sub-editor. This methodology outlines the rigorous process we follow to ensure our ETF recommendations are up-to-date, reliable, and insightful.
- Analyst research & recommendations: Our seasoned market analysts use their in-depth sector knowledge to identify ETFs with strong potential, ensuring they meet high standards of performance, liquidity, and market potential.
- ETF evaluation: We evaluate ETFs based on their underlying assets, historical performance, expense ratios, and tracking accuracy, alongside macroeconomic factors and sector trends.
- Fund performance reports: We assess ETFs through the latest performance reports, analyzing key metrics like returns, volatility, expense ratios, and assets under management (AUM).
- Sector analysis and external recommendations: Our detailed sector analysis, combined with recommendations from reputable sources like Barron’s and Zacks, provides an additional layer of validation for our selections.
- Quarterly review & refresh: We update our curated ETF list quarterly, re-evaluating each ETF based on the latest reports, industry developments, and market conditions to ensure our recommendations reflect the most current information available.