The State Street SPDR S&P Biotech ETF (NYSEMKT:XBI) provides broad exposure to the biotech industry, while the First Trust NYSE Arca Biotechnology Index Fund (NYSEMKT:FBT) offers a much more concentrated, equal-weighted alternative. Biotech is a volatile sector often driven by clinical trial results and regulatory approvals. This comparison looks at how these two funds offer exposure to the space.
While both focus on the same industry, they utilize different indexing methodologies that significantly impact their volatility and concentration risk. Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months.
Dividend yield is the trailing-12-month distribution yield. The SPDR ETF is the more affordable option with a 0.35% expense ratio. The First Trust fund costs 20 more basis points.
Growth of $1,000 over 5 years (total return) The First Trust biotech fund focuses exclusively on healthcare and holds 30 companies. Its largest positions include Halozyme Therapeutics (NASDAQ:HALO) at 4.28%, Corcept Therapeutics (NASDAQ:CORT) at 3.92%, and BeOne Medicines (NASDAQ:ONC) at 3.86%. It seeks to track the NYSE Arca Biotechnology Index.
The SPDR ETF also allocates 100% of its assets to the healthcare sector but spreads them across 155 holdings. Its largest positions include Twist Bioscience (NASDAQ:TWST) at 1.73%, Oruka Therapeutics (NASDAQ:ORKA) at 1.57%, and Apogee Therapeutics (NASDAQ:APGE) at 1.52%. The fund tracks the S&P Biotechnology Select Industry Index.
For more guidance on ETF investing, check out the full guide at this link. My big three checkboxes when it comes to investing in ETFs are cost (read: expense ratios), assets under management, and diversification/concentration risk. I'm very Goldilocks-like in that way; few ETFs will completely satisfy my requirements, and my whims can change at any moment.
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