The pharmaceutical industry is quite a large and powerful sector. New advancements in medicine are leading to new drugs being created every day. And then, unfortunately, there are medications that have recalls, side effects or fail to produce as advertise.
As an investor, this size and volatility can lead to many opinions and opportunities. Trading opportunities. So if you feel this is an untapped market for your portfolio, then you’re going to want exposure to this industry.
Now, you can consider buying individual pharma company stocks, perhaps an index, or even a mutual fund targeting the sector. But I am going to suggest you research some pharmaceutical ETFs instead.
ETFs come with many advantages over mutual funds (lower fees), indexes (easier transactions) and individual stocks (sector diversification), and they also have tax benefits as well. So if you want instant exposure to the pharma sector with one simple transaction, a pharmaceutical ETF may be the way to go.
And to help you with your decision, I’ve compiled a list of pharma ETFs to help you with your research. Take the time to research each fund and see which (if any) is the best fit for your portfolio or investing strategy.
DRGS - RBS Global Big Pharma ETN
This is actually a pharmaceutical ETN and is 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 is 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 are Pfizer, Johnson and Johnson, Merk, and Abbott Labs.
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). The top holdings in this exchange traded fund are Jazz Pharmaceuticals, Hospira Inc, ViroPharma and Merck. Be sure to check back to this list often as I will update it as it grows as well as remove any ETFs that get de-listed.
And 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.
And if you’re looking for some related ETFs, then here are two more lists for you. I’ve compiled a list of healthcare ETFs and then after that is a list of biotechnology funds...
List of Health Care ETFs
List of BioTechnology ETFs
BBH - Market Vectors Biotech ETF