The goal of the investment is to mirror the performance of the ICE Biotechnology Index, which is made up of U.S.-listed biotechnology stocks. The fund will typically invest at least 80% of its assets in the index’s component securities and investments with economic characteristics that are substantially identical to the index’s component securities, with up to 20% of its assets in certain futures, options, and swap contracts, as well as cash and cash equivalents. It isn’t well-balanced.
What are the components of the IBB ETF?
IBB follows an index of publicly traded biotechnology companies in the United States. The index is rebalanced every three months and completely recreated once a year in December. The product was previously known as the iShares Nasdaq Biotechnology ETF and followed the NASDAQ Biotechnology Index until June 21, 2021.
Is it wise to invest in biotech funds?
Biotech mutual funds invest in companies in the biotechnology area, which is a subset of the broader health sector.
Biotechnology was one of the most successful industries in 2020. Biotech can be a good addition to a diverse portfolio if you’re looking to invest for the long term. In the near term, prices might be unpredictable, but biotech funds have traditionally outperformed the market in the long run.
What exactly is the distinction between IBB and XBI?
On rumors that Senate Republicans are close to introducing new healthcare legislation, a range of exchange-traded funds (ETFs) following the industry rose. Eight of the 15 ETFs that set all-time highs on Wednesday were healthcare funds. A biotech ETF was one of the eight. That could indicate that the biotechnology sector, in which 11 ETFs achieved 52-week highs yesterday, has more room to run. Two of the major biotech ETFs are the iShares Nasdaq Biotechnology ETF (IBB) and the SPDR S&P Biotech ETF (XBI).
Year to date, IBB, the largest biotech ETF, and XBI, the second-largest biotech ETF, are up 19.2 percent and 32.9 percent, respectively. In comparison, the Health Care Select Sector SPDR gained 16.6 percent (XLV). Biotech stocks typically account for 20 percent to 25 percent of the weights in XLV and similar cap-weighted healthcare ETFs, so tactical investors might choose funds like IBB or XBI to get pure-play biotech exposure. (For more information, see Biotech Funds Could Break Out.)
“Republican efforts to repeal Obamacare, also known as Obamacare,” according to Reuters, “have generated anxiety this year for investors in the industry, but analysts doubt the Senate’s proposal, expected on Thursday, will significantly derail the entire group’s progress.” That’s good news for the healthcare industry and biotech stocks, which plummeted last year after both presidential contenders publicly blasted pharmaceutical corporations over drug prices. The healthcare sector’s annual returns were negative for the first time since 2008.
Investors tend to be confident that political volatility will be minimal for biotech ETFs. XBI has received approximately $23 million in additional money from investors this month, while IBB has received $136.5 million. The ETF’s year-to-date outflows of $376.7 million have been reduced by recent inflows into IBB. Investors have been more excited about XBI this year, investing $158.1 million to the ETF. (See also: Why Biotech Might Be a Game-Changer.)
IBB is a cap-weighted ETF, whereas XBI is an equal-weight ETF. This provides XBI with a possible performance advantage when smaller biotech stocks are performing well, but it also makes the ETF more volatile than its cap-weighted counterpart. XBI has almost 800 basis points higher three-year annualized volatility than IBB.
Biotechnology and healthcare ETFs are gaining traction thanks to strong earnings. The sector’s first-quarter results bolstered optimism. “According to Thomson Reuters I/B/E/S, 84 percent of healthcare businesses surpassed analysts’ first-quarter profit projections, compared to 76 percent for the S&P 500 overall,” adds Reuters. (For more information, see A Biotech Primer.)
What exactly is the IHI ETF?
IHI is a specialty sector fund that focuses on domestic companies involved in the medical equipment sector of the health-care industry. The fund is rebalanced quarterly and weighted by float-adjusted market size, with individual company capping limits of 22.5 percent.
Is there an ETF for global jets?
The U.S. Global Jets ETF (JETS) is a stock exchange-traded fund that tracks an index of firms associated in the airline industry, such as airlines, manufacturers, airports, and terminal services. Airlines such as American, Southwest, United, and Delta are among the top holdings.