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4 Ways to Play the Boom in Biotech Stocks

This burgeoning sector holds plenty of promise, but how you play greatly depends on how much risk you can stomach

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Biotech Stocks: iShares Nasdaq Biotechnology Index Fund (IBB)

biotech-stocks-ibbType: ETF
Assets Under Management: $5.8 billion

If you’re looking for size, diversification and a long track record in the biotech sector, the iShares Nasdaq Biotechnology Index Fund (IBB) could be a good choice. IBB has been around since 2001 and has a whopping $5.8 billion in assets under management. This ETF invests primarily in large, growth companies that engage in biomedical research and development of drugs or other treatments for medical conditions.

IBB’s top five holdings — which currently comprise about 36% of its total assets — are Biogen (BIIB), Gilead Sciences (GILD), Amgen (AMGN), Regeneron Pharmaceuticals (REGN) and Celgene (CELG). It’s also a fairly cheap way to invest in biotech stocks, with expenses just running 0.48% for exposure to IBB has gained 65% over the past year and its expense ratio is on par with the rest of the sector at 0.48.

The Takeaway: Conservative investors looking to gain exposure to the biotech sector could find IBB a good bet for several reasons. ETFs have the built-in advantage of diversification. ETFs trade over a major exchange just like equities, and expenses tend to be lower than those of actively traded mutual funds. In this case, expenses are just 0.48%, or $48 annually for every $10,000 invested, to gain access to 122 stocks in one easy bundle.

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