Overview Of iShares Nasdaq Biotechnology Index Fund

Imagine being able to invest in futuristic companies with enormous potential not only for the next couple of years but also for decades to come. The opportunity to invest in the Biotech Industry is now no longer a difficult proposition due to the emerging ETFS growth in the segment. Biotech ETFS have come as a boon for investors who were confused understanding the confusing scientific and technical jargon that biotech companies usually harbor in their annual reports. If there's any other sector exchange traded fund (ETF) that gets more attention than the nano ETF, it is the biotech ETF.

Because the success of biotech firms often depends on unproven revenue streams, companies in this industry can be extremely risky. As such, many investors have preferred to gain diversified exposure to the sector through ETFs that maintain well-diversified holdings.

The fund we are tracking in this article is the iShares Nasdaq Biotechnology Index Fund (IBB) that is linked to the NASDAQ Biotechnology Index, a benchmark that includes biotechnology and pharmaceutical companies listed on the NASDAQ exchange. Although interest in it, as measured by media postings, has waned recently, it still holds $1.9 billion in assets and it is probably the most diversified of the lot with 176 underlying stocks. Even though this ETF holds some of the riskiest little biotech stocks on the market it is generally the safest investment as the risk is diluted substantially. IBB also accurately mirrors the entire publicly traded biotech industry as the NASDAQ holds almost the entire field of stocks. IBB is also the most liquid biotech ETFS in the market currently.

The investors should also be aware of some limitations of the iShares Nasdaq Biotechnology Index Fund. The fund is not tracking the father of biotech stocks, Genentech, as it currently does not trade on the NASDAQ. Investors could easily invest in Genentech stock separately if desired. Despite its broad base, IBB is relatively top-heavy: the top ten components account for almost half of total holdings while 60 companies have an allocation of 0.25% or less. IBB has an expense ratio of 0.48% and is more actively traded than the other biotech ETFs combined.

IBB Top Ten Holdings

1. Amgen, Inc. (AMGN): 9.12%
2. Teva Pharmaceutical Industries, Ltd. ADR (TEVA): 7.30%
3. Celgene Corporation (CELG): 6.22%
4. Gilead Sciences, Inc. (GILD): 6.19%
5. Vertex Pharmaceuticals (VRTX): 3.70%
6. Dendreon Corporation (DNDN): 3.61%
7. Biogen Idec, Inc. (BIIB): 2.78%
8. Perrigo Company (PRGO): 2.74%
9. Alexion Pharmaceuticals, Inc. (ALXN): 2.57%
10. Genzyme Corporation (GENZ): 2.45%

IBB Market Cap Breakdown

Giant 16.42%
Large 21.46%
Medium 37.08%
Small 16.08%
Micro 8.86%

IBB Expenses & Fees

* Expense Ratio: 0.48%
* Category: Health & Biotech Equities
* Category Range: 0.21% to 0.75%
* Category Average: 0.49%

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