What are the best biotech etfs for beginners?

Beginners should gravitate to one of the larger biotech ETFs that offers broad coverage of the sector. All investors, including beginners, should look for the ETFs that hold the stocks they want to own, have good historical track records and charge low expenses.

Should I invest in biotech etfs in 2025?

There are both pros and cons to investing in biotechs in 2025. On the plus side, most have traded down off their highs, and dealmaking may pick up in the industry over the next few years. They are also often more defensive during recessions. On the down side, funding could prove to be a challenge for smaller biotechs, potentially putting them at risk of going out of business.

Which biotech etfs pay dividends?

Generally speaking, biotech ETFs are designed for growth, not income. That being said, many biotech ETFs do pay a nominal dividend. The iShares Biotechnology ETF (IBB), for example, currently yields 0.30%, while the VanEck Biotech ETF (BBH) pays 0.80%. Another industry giant, the SPDR S&P Biotech ETF (XBI), yields 0.17%.

Are biotech etfs good for long-term growth?

Biotech ETFs, by and large, are pure-growth investments. This makes them excellent candidates for long-term growth. However, investors should understand the risk-reward characteristics of biotechs and consider using them as just a portion of a diversified portfolio.

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Best Biotech ETFs for 2025

April 22, 2025

8 min Read

Written by John Csiszar

Edited by Nupur Gambhir

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Biotechnology uses living organisms to develop new medicines and technologies that benefit both the environmental and social stratospheres. If you’re interested in investing in this innovative sector, exchange-traded funds, or ETFs, can be a great way to get started. In addition to providing the potential for explosive growth, biotech ETFs can also help diversify your overall portfolio.

Before investing in an ETF, it’s essential to do your research and consider your risk tolerance and investment goals. Biotech ETFs can offer diversification and exposure to a dynamic sector, but they can also be more volatile than traditional investments. Consulting with a financial advisor can help you make informed decisions tailored to your individual needs and preferences.

Best Biotech ETFs in 2025

When assessing all angles of an investment, you want to make sure your money will be working for you, or at least predicted to do so. Here’s a range of biotech ETFs in 2025 that vary in terms of their investment objectives and risk parameters.

1. VanEck Biotech ETF (BBH)

Top five holdings: Amgen, Gilead Sciences, Vertex Pharmaceuticals, Argenx Se, Natera Inc
Average annual return since inception: 12.30%
Expense ratio: 0.35%

The goal of this ETF is to follow an index, the MVIS US Listed Biotech 25 Index, that follows some of the largest U.S. exchange-listed companies in biotech. These companies have specific criteria to be included, such as deriving half of their revenue from biotech-related products.

2. iShares Biotechnology ETF (IBB)

Top five holdings: , Vertex Pharmaceuticals, Gilead Sciences, Amgen, Regeneron Pharmaceuticals, Alnylam Pharmaceuticals
Average annual return since inception: 5.91%
Expense ratio: 0.45%

According to the fund’s prospectus, its goal is to follow an index of U.S.-listed equities in the biotechnology sector. In other words, this is a passive ETF, which could appeal to you if you are looking for something a bit safer, less costly and more transparent as you can see exactly which stocks the index tracks.

3. SPDR S&P Biotech ETF (XBI)

Top five holdings: Natera, Vertex Pharmaceuticals, Insmed, Alnylam Pharmaceuticals, Neurocrine Biosciences
Average annual return since inception: 8.94%
Expense ratio: 0.35%

This ETF is also a passive fund — meaning it’s following an index. It also has exposure to healthcare and biotech sectors, which can provide further diversification. Additionally, it’s sponsored by State Street Global Advisors and features a competitive expense ratio.

4. Global X Genomics & Biotechnology ETF (GNOM)

Top five holdings: Natera, Veracyte, Qiagen N.V., Biontech SE-ADR, Biomarin Pharmaceutical
Average annual return since inception: -10.16%
Expense ratio: 0.50%

The Global X Genomics & Biotechnology ETF is also a passive fund, which follows an index. This specific index centers around genomics as its main focus. It also tracks the Solactive Genomics Index which means that the companies included in the index generally focus on sectors such as the following:

Gene editing
Development and testing of genetic medicine and therapies
Computational genomics
Genetic diagnostics
Biotechnology

5. WisdomTree BioRevolution Fund (WDNA)

Top five holdings: Natera, Novozymes A/S, Twist Bioscience, Eli Lilly & Co, Bridgebio Pharma
Average annual return since inception: -15.62%
Expense ratio: 0.45%

As another passive fund, WisdomTree BioRevolution follows a different index. This index follows companies that are involved in biology-focused technologies and help further advancements in genetics.

This ETF is definitely more aggressive. Its small size and focus on breakthrough companies make it more of a “boom-or-bust” type of fund.

Why Invest in Biotech ETFs?

Biotechnology is one of the most exciting sectors in the entire stock market. Biotechs innovate, engineer and create products that can literally be life-saving, or at the very least improve the quality of people’s lives. They also offer the type of volatile, “boom-or-bust” trading patterns that many investors find exciting.

Investors are well aware of the type of drugs that specific companies are working on, and their progress is closely followed from research and development through clinical trials and product release. If there are any surprises along the way, either positive or negative, stocks can react violently. While this increases their risk level and volatility, it also offers the potential for high returns. This is why many investors choose to invest in biotechs. ETFs help diversify away a bit of this risk while still offering high upside potential, which helps make them popular as well.

Biotech ETFs vs. Other Investment Options

Biotech ETFs can be quite volatile. For this reason, you might want to include some less aggressive investments in your overall portfolio. This can help balance out the ups and downs of your account while still providing the opportunity for capital appreciation.

For those actually looking to amp up their risk/reward profile, buying individual biotech stocks, either in conjunction with or in place of biotech ETFs, can do the trick.

If you’re looking for a more conservative portfolio, it’s possible that any type of biotech investment, either via ETFs or individual stocks, isn’t appropriate for you. You may want to speak with a financial advisor to determine if biotechs are a match for your investment objectives and risk tolerance.

Risks of Investing in Biotech ETFs

Risks can run high in the biotech world, which is why many investors choose ETFs to help diversify away some of that risk. But many risks cannot be avoided. Here are some things to consider before you invest:

Company-specific risks: Biotechs are more susceptible to company-specific risks than many other industries. While in other industries, a stock may temporarily suffer if earnings come in below expectations, biotech stocks can be absolutely massacred if a drug under development fails in the clinical trial phase.
Legal and legislative risks: The healthcare industry in America, which includes the drugs that biotechs produce, is a legal and legislative nightmare. Companies that don’t comply with various rules can suffer, and legislative changes can affect how much money they earn. Biotechs can also get sued if their products are found to cause damage or harm. To invest in biotechs, you’ll have to be aware of the legal and legislative climate and how it pertains to the stocks or ETFs you buy.
General market risks: Biotech stocks can be quite volatile. If the general market is selling off, biotechs can sometimes get hammered even harder than the general market. A biotech ETF can potentially soften the damage a bit, but it cannot avoid it completely.

Trends Shaping Biotech in 2025

Biotech companies are a bit unique in the sense that they aren’t as reliant on consumer behavior as other industries. There will always be a demand for the products that biotech companies research and develop — the trick is in actually getting those drugs through clinical trials and into production. In that sense, biotechs aren’t as affected by things like consumer sentiment or geopolitical concerns. In fact, biotech stocks can often hold up better during recessions or other events that may drag down the overall market because investors are betting on the success of their drugs, which will be in demand by customers regardless of the economic environment.

In 2025, biotechs might have a bit of a tailwind due to the rise of “precision medicine,” also called “personalized medicine.” This process involved decoding a patient’s DNA to better determine the exact treatment that will help them in their specific situation. According to Labiotech, this type of treatment can be particularly effective at fighting cancer. While researchers have labored for decades to find a universal cure for cancer, precision medicine may turn out to be more effective at helping patients on a case-by-case basis.

How To Buy Biotech ETFs

You can buy any type of ETF, including a biotech ETF, on the open market, just like a stock. Here’s what you’ll need to do:

Open a brokerage account: Choose a zero-commission broker that offers a wide range of ETFs.
Research a range of biotech ETFs: There are a number of different types of biotech ETFs, and they can have very different risk and reward characteristics. Be sure you understand exactly what you’re investing in before you put down your money.
Get the right ticker symbol: When you enter your order, you’ll need to use the biotech ETFs ticker symbol, not its name.
Choose an appropriate amount to invest: Although biotech ETFs offer some level of diversification with the sector, they are still considered “nondiversified ETFs” because all of their investments are in the same industry. For this reason, you should generally only use a biotech ETF as a portion of your overall portfolio and not sink all of your money into a single investment.
Enter the trade: Using your brokerage’s online platform, enter the ticker symbol for your fund and the amount you want to invest before executing the trade.

Want to optimize your investment strategy? Discover our in-depth coverage of the best stocks to buy.

Caitlyn Moorhead contributed to the reporting for this article.

Information is accurate as of April 21, 2025, and subject to change. Data was sourced from Yahoo! Finance.

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