A biotech ETF most certainly was the ETF to invest in since 2010. Prices went through the roof during the last couple of years. The big question in these situations is whether investors went way ahead of realistic expectations or not.
Will these biotechnology companies make good on their promises? Partly I do think they will. But even moreimportantly will be upcoming mergers and acquisitions in this industry.
The biotech sector is relatively young and they are backed by money of investors. After some years these investors want to cash in and this will propel mergers and acquisitions.
The biggest challenge these biotech companies face is the long wait until profits really materialize. Developing a new product takes up a lot of time but getting it approved is much more difficult and it takes up years.
I personally know someone who has had a biotech company. He admitted that even while it was very successful it takes up too much time for investors to cash in their profits. The greatest danger at these biotechnology companies is that investors want to see profits in too short a time span.
But fast results are just impossible in this industry. The wavering amount of patience and a too rosy price explosion may cause prices to collapse. The fear of a bubble is a real one here.
iShares Nasdaq Biotechnology ETF
This iShares Biotech ETF is tracking the Nasdaq Biotechnology Index. Over 140 American biotech companies are included here.
The Top 5 companies in this biotech ETF are: Biogen, Celgene, Gilead Sciences, Regeneron Pharmaceuticals and Amgen with a 8% share each.
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ETF provider: iShares (BlackRock)