5 Best Biotech ETFs for 2026 and How to Invest

Benefits and risks of investing in biotech ETFs

The benefits of investing in biotech ETFs include:

• Diversification: Biotech ETFs own many biotech stocks. This reduces the risk of one big loser dragging down your returns.
• Professional management: The biotech industry is complicated. Investing in biotech ETFs gives you access to professional managers who know the industry well.
• Liquidity: Some individual biotech stocks aren’t heavily traded. To sell these stocks quickly, you might have to accept a lower price. The larger biotech ETFs allow you to avoid this liquidity risk.

However, there are also several potential risks associated with investing in biotech ETFs, such as:

• Overexposure to one sector: If you invest too heavily in biotech ETFs, your overall returns could be lower during periods when biotech stocks are out of favor.
• Volatility: Biotech ETFs can be highly volatile because biotech stocks are often highly volatile.
• Less control: Biotech ETFs could own biotech stocks that you don’t like. Buying these funds reduces your control over your investments.

Methodology: How these ETFs were chosen

The most important criterion in selecting these five ETFs was that they all held a significant number of individual biotech stocks. Most of them clearly reflect their focus on the biotech industry with their names.

Another key factor in choosing the funds was their liquidity (i.e., how easily they can be traded without significantly affecting their price). Each of these biotech ETFs is highly liquid.

Each fund’s net assets under management amount was another consideration. Most of these ETFs have AUMs in the billions, with one outlier — the Van Eck Biotech ETF.

Should you invest in biotech ETFs?

Investors with a low tolerance for risk and volatility probably shouldn’t invest in biotech ETFs. Like the individual biotech stocks that they own, biotech ETFs can be highly volatile. Income investors will also likely find better alternatives, since the dividend yields of biotech ETFs tend to be low (or nonexistent).

On the other hand, more aggressive investors with high risk tolerances could find biotech ETFs quite appealing. They offer a convenient way to invest in a basket of biotech stocks in one fell swoop. Over the long term, biotech ETFs could generate market-beating returns.