Want to invest in an exciting and fast-growing sector? Biotech offers an opportunity to do so. Hundreds of biotech companies are hard at work developing innovative therapies. Some could even be game changers in preventing and treating diseases.

Exchange-Traded Fund (ETF)

An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once.

There's one big downside to investing in biotech stocks, though. Many are very risky. The good news is that you can 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.

A scientist looking through a microscope.
Image source: Getty Images.

Understanding biotech ETFs

Understanding biotech ETFs

ETFs are similar to mutual funds in that they can own lots of stocks (and sometimes other assets). Mutual funds, however, are only priced once per day, and you can only buy mutual funds through a brokerage or directly from the issuer.

On the other hand, ETFs trade on public exchanges just like individual stocks. And, like a stock, you can instantly buy or sell an ETF.

Investing in an ETF comes with a cost beyond just the transaction charge that a brokerage might require. The funds charge fees to cover their operating costs. The expense ratio of an ETF is calculated by dividing the fund's operating expenses by its average assets.

Biotech ETFs have all the characteristics of ETFs in general. The key difference is that these ETFs hold only the stocks of companies that focus on biotechnology.

Best biotech ETFs

Best biotech ETFs in 2025

The best biotech ETFs tend to be the biggest ones. They have large amounts of assets under management and relatively low expense ratios. Here are five of the best biotech ETFs.

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1. iShares Biotechnology ETF

  • Total assets: $7.1 billion
  • Expense ratio: 0.45%
  • Dividend yield: 0.17%

The iShares Biotechnology ETF (IBB 0.58%) attempts to track the results of an index that includes all U.S.-listed stocks in the biotechnology sector. The ETF currently owns around 214 biotech stocks.

Among the iShares Biotechnology ETF's top holdings are some of the biggest biotech stocks based on market capitalization rank. They include Gilead Sciences (GILD 0.59%), Vertex Pharmaceuticals (VRTX -0.89%), Amgen (AMGN -0.04%), Regeneron Pharmaceuticals (REGN 5.0%), and IQVIA Holdings (IQV 1.21%).

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 8.2%.

2. SPDR S&P Biotech ETF

  • Total assets: $7 billion
  • Expense ratio: 0.35%
  • Dividend yield: 0.15%

The SPDR S&P Biotech ETF (XBI 0.04%) seeks to track the S&P Biotechnology Select Industry Index. The index uses a modified equal weighting, which means the percentage of total assets for each stock owned is roughly the same. It gives investors exposure to large-cap, mid-cap, and small-cap biotech stocks. 

The ETF currently owns around 140 stocks. Its top holdings include Alnylam Pharmaceuticals (ALNY 0.99%), Viking Therapeutics (VKTX -0.68%), Gilead Sciences, Exact Sciences (EXAS -0.18%), and Sarepta Therapeutics (SRPT -8.0%). However, because of its modified equal weighting, none of the largest positions in the ETF make up a significantly greater percentage of assets than other stocks.  

The SPDR S&P Biotech ETF has delivered a total annualized return of about 10.4% since its inception in 2006. Over the past five years, however, the ETF generated an average annual return of 5.4%.

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Ark Genomic Revolution ETF

  • Total assets: $1.3 billion
  • Expense ratio: 0.75%
  • Dividend yield: 0%

The Ark Genomic Revolution ETF (ARKG 2.21%) 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. It concentrates on gene-editing stocks, molecular diagnostics stocks, virtual care stocks, and the stocks of companies developing targeted therapeutics. 

The ETF typically owns between 40 and 60 stocks. Its current top positions include Twist Bioscience (TWST 5.7%), CRISPR Therapeutics (CRSP 0.21%), Recursion Pharmaceuticals (RXRX -2.91%), CareDx (CDNA 1.08%), and Veracyte (VCYT 1.42%).

The Ark Genomic Revolution ETF began trading in 2014. Since then, it has generated an average annual return of around 3.3%. Over the past five years, the ETF's annualized return is a negative 1.9%.

4. First Trust NYSE Arca Biotechnology Index Fund

  • Total assets: $1.17 billion
  • Expense ratio: 0.56%
  • Dividend yield: 0%

The First Trust NYSE Arca Biotechnology Index Fund (FBT 0.55%) seeks to track the performance of the NYSE Arca Biotechnology Index. The index owns equal weights of the stocks of a cross-section of biotech companies, including those focused on genomics and developing monoclonal antibody-based technologies.

The ETF currently has about 30 positions. Its top holdings include Catalyst Pharmaceuticals (CPRX -0.27%), Exelixis (EXEL -0.22%), Sarepta Therapeutics, Gilead Sciences, and Corcept Therapeutics (CORT 1.84%).

Since the ETF's inception in 2006, it has achieved an average annual total return of about 12.6%. Over the past five years, the fund generated an annualized return of more than 6.8%.

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5. VanEck Biotech ETF

  • Total assets: $436 million
  • Expense ratio: 0.35%
  • Dividend yield: 0.49%

The VanEck Biotech ETF (BBH 0.43%) tries to own the most liquid biotech companies based on market cap and trading volume. As such, its approach tends to favor the biggest companies in the biotech sector. The ETF's portfolio can include U.S. companies, as well as foreign companies listed on U.S. stock exchanges.

The ETF currently owns 26 biotech stocks. Its top holdings include Amgen, Vertex Pharmaceuticals, Gilead Sciences, Regeneron Pharmaceuticals, and Argenx (ARGX -0.28%).

The VanEck Biotech ETF was launched on Dec. 20, 2011. Since then, the fund has generated an annualized total return of about 13.8%. Over the past five years, the ETF's average annual return was close to 8.9%.

FAQ

Biotech ETFs FAQ

What biotech ETF is best?

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Different investors could find different biotech ETFs more attractive than others. The biggest biotech ETF based on assets under management is the iShares Biotechnology ETF (NASDAQ:IBB).

Is there a Vanguard biotech ETF?

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No, Vanguard does not currently offer an ETF that focuses specifically on biotechnology. The closest thing to a biotech ETF in the Vanguard family is the Vanguard Health Care ETF (NYSEMKT:VHT), which does own some biotech stocks.

Is there a small-cap biotech ETF?

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There are no ETFs that exclusively focus on small-cap biotech stocks. However, some ETFs do primarily own small-cap, micro-cap, and mid-cap biotech stocks, including the AdvisorShares Psychedelics ETF (NYSE: PSIL).

What are the top biotech stocks to buy?

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Different investors could find different biotech stocks more attractive, depending on their risk tolerance and investing objectives. However, some top biotech stocks that many investors could like include Vertex Pharmaceuticals (NASDAQ:VRTX), Axsome Therapeutics (NASDAQ:AXSM), and Summit Therapeutics (NASDAQ:SMMT).

Keith Speights has positions in SPDR Series Trust - SPDR S&P Biotech ETF, Teladoc Health, and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Gilead Sciences, Ionis Pharmaceuticals, Iqvia Holdings, Pacific Biosciences Of California, SPDR Series Trust - SPDR S&P Biotech ETF, Seagen, Teladoc Health, and Vertex Pharmaceuticals. The Motley Fool recommends Amgen, BioMarin Pharmaceutical, Exact Sciences, Exelixis, Moderna, and TG Therapeutics. The Motley Fool has a disclosure policy.