Use Pharmaceutical ETFs to Invest in the Pharma Sector
The pharmaceutical industry contains many well-known, large and powerful companies, and ongoing advancements in medicine continually lead to new drugs being tested and created every day. Unfortunately, these very same companies produce medications that have recalls, dangerous side effects or fail to produce results as advertised.
As an investor, the size and volatility of the Pharma sector can lead to many opinions and profitable trading opportunities. If you feel that your portfolio could benefit from some exposure to this sector, you can invest in this industry through several different means.
You might consider buying individual pharma company stocks, perhaps an index, or even a mutual fund that targets certain niches or samples the overall sector. However, you won't want to miss out on the potential benefits of exchange-traded funds, so research a few pharmaceutical ETFs to see if they make sense for your portfolio.
ETFs come with many advantages over mutual funds including lower fees, with easier transactions than indexes and better sector diversification than individual stocks. They also offer tax benefits such as lower capital gains taxes due to less trading within the fund. If you're looking for instant exposure to the pharma sector with one simple transaction, a pharmaceutical ETF may be the way to go.
To help you do some research to make a more informed decision, the following list includes a selection of pharma ETFs to help you with your homework. Take the time to check out each fund and see which might make good candidates for your portfolio or investing strategy.
DRGS: RBS Global Big Pharma ETN
This security is actually a pharmaceutical exchange-traded note (ETN), linked to the NYSE Arca Equal Weighted Pharmaceutical Total Return Index.
The exchange-traded note targets companies involved in various phases of development, production, and marketing of pharmaceuticals. The holdings are represented in approximately equal dollar amounts.
The underlying index gets rebalanced quarterly at the close of trading on the third Friday of March, June, September, and December. Some of the top holdings include Shire (SHPGY), Allergen (AGN), and Merck (MRK).
IHE: iShares Dow Jones US Pharmaceuticals ETF
This pharma ETF tracks the Dow Jones U.S. Select Pharmaceuticals Index, and some of the top holdings include Pfizer, Johnson and Johnson, Merck, and Abbott Labs.
PJP: PowerShares Dynamic Pharmaceuticals ETF
This pharmaceutical ETF follows the Dynamic Pharmaceuticals Intellidex Index. Some of the top holdings in this fund are Amgen, Gilead Sciences, Pfizer, and Merck.
XPH: SPDR S&P Pharmaceuticals ETF
This SPDR correlates with the S&P Pharmaceuticals Select Industry Index (SPSIPHTR). This ETF's top holdings include Jazz Pharmaceuticals, Hospira Inc, ViroPharma, and Merck.
Do Your Due Diligence
Before making any trades, make sure to consult your financial advisor, your broker or a financial professional. Research each pharma ETF individually and have a good feel for how the funds work and how they react to different market conditions.
As with any investment (ETF or otherwise), conduct the due diligence necessary to make the right decisions based on your risks and your goals. No investment is risk-free, so make sure you are aware of the pros and cons of any trade or in this case pharmaceutical ETF.
If you’re looking for some related ETFs, the following two lists can get you started. The first list includes healthcare ETFs, along with an additional list of biotechnology ETFs.
List of Health Care ETFs
- AXHE: iShares MSCI ACWI ex US Health Care Sector Index ETF
- CURE: Direxion Daily Health Care Bull 3X Shares ETF
- FHC: Focus Morning Star Health Care Index ETF
- FXH: First Trust Health Care Alpha DEX ETF
- HGEM: EG Shares Health Care GEMS ETF
- IHF: iShares Dow Jones US Health Care Provider ETF
- IRY: SPDR S&P International Health Care Sector ETF
- IXJ: iShares S&P Global Health Care Sector ETF
- IYH: iShares Dow Jones US Health Care ETF
- PTH: Power Shares Dynamic Health Care ETF
- RXD: Ultra Short Health Care Pro Shares ETF
- RXL: Ultra Health Care Pro Shares ETF
- RYH: Rydex S&P Equal Weight Health Care ETF
- SICK: Direxion Daily Health Care Bear 3X Shares ETF
- VHT: Vanguard Health Care ETF
- XHE: SPDR S&P Health Care Equipment ETF
- XHS: SPDR S&P Health Care Services ETF
List of BioTechnology ETFs
- BBH: Market Vectors Biotech ETF
- BIB: Ultra NASDAQ Biotechnology ETF
- BIS: Ultra Short NASDAQ Biotechnology ETF
- FBT: First Trust NYSE Arca Biotech Index ETF
- IBB: iShares Nasdaq Biotechnology ETF
- PBE: Power Shares Dynamic Biotech & Genome ETF
- XBI: SPDR S&P Biotech ETF
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.