Biotech ETFs Can Be Top Performers

Biotech stock is very popular because it is in a growth cycle. As the world population ages, more medical treatment will be needed and preventative medicine is on the rise. Biotech etfs have many ways to select the stock they purchase and carry in their portfolios. It is easy to understand the popularity and profitability of these etfs.

There is a big difference in the way stock is selected in the biotech industry. One company selects every stock than reduces the numbers and carries only stocks that performs the best and has good volume. Another uses a formula it developed to select which stocks to carry. Some companies select the top 20 biotech stocks and make very few changes. Some carry a selection of nearly all the stocks available; another carefully chooses a group and does not change.

Different biotech etfs have different rates of return of investment. Before investing astute traders review the performance of each and invest in the top producing companies. There is transparency giving the trader a chance to review each company in the portfolio and invest the group that offers the best opportunity for future profits. Even though this is an active and growing field, investors still need to do their homework.

There are three distinct advantages to this form of investment. They have low costs, transparency and are very liquid. These companies purchase and hold the assets for a long time; there will not be a lot of brokers’ commissions and expenses. The investors know the assets of each etf. They are easy to buy or sell.

Etfs are electronic traded funds; they are traded on the stock exchange at approximately the same price as the value of its assets. This price will fluctuate during the trading day as the value of the individual stocks move. The prices are based on the NAV which is the net asset value. This asset value is based on the closing price of the stock at the end at the close of trading of that day. This price will not be posted on the biotech eft site until the next day. In the United States these are regulated by the SEC. The shares must be approved by the securities exchange they are sold through.

A biotech eft allows greater diversification in the stock market, has lower costs and provides the opportunity to make more money by holding a wider variety of stocks.

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