The biotechnology sector entered bear market territory after major biotech indexes fell drastically between mid-July and the end of September 2015. The sector fell by 13% between Sept. 21, 2015, and Sept. 25, 2015, which may have been sparked by presidential candidate Hillary Clinton's comments on her proposal to stringently regulate health care companies. The S&P Biotech Select Industry Index fell by 26.02% for the quarter ending on Sept. 30, 2015. Additionally, the NYSEARCA Biotech Index fell by 18.09% and the NASDAQ Biotech Index fell by 17.93% over the same period. The fall in the sector has caused it to give up its gains from the beginning of the year through its high on July 20.

Investors who are bullish on the biotech sector can invest in a diversified portfolio of biotech stocks, which mitigates company risk, by purchasing an exchange-traded fund (ETF) that focuses on the sector. Investors should look to invest in biotech ETFs with low expense ratios to minimize costs.

SPDR S&P Biotech ETF

The SPDR Series Trust - SPDR S&P Biotech ETF (NYSEARCA: XBI) was issued on Jan. 31, 2006, by State Street Global Advisors. The fund is managed by SSGA Funds Management, Inc. and charges an annual gross expense ratio of 0.35%. As of Oct. 31, 2015, it has a year-to-date (YTD) return of 7.94%, which is higher than the S&P Biotech Select Industry Index, its underlying index.

The fund seeks to provide investment results corresponding to the total return performance of its underlying index. XBI aims to achieve its investment objective by investing at least 80% of its total net assets in securities included in the underlying index. As of Nov. 13, 2015, XBI has total net assets of $2.15 billion and an average daily trading volume of 5.74 million shares over a trailing three-month period.

Although the fund has experienced a high degree of volatility during the second half of 2015, it has historically generated high returns. Investors may see this recent dip as a buying opportunity and predict the biotech sector will continue to increase in 2016.

iShares NASDAQ Biotechnology ETF

The iShares NASDAQ Biotechnology ETF (NASDAQ: IBB) seeks to provide exposure to biotechnology and pharmaceutical companies by investing in the NASDAQ Biotechnology Index, its underlying index. Under normal market conditions, IBB invests at least 90% of its total net assets in securities comprising the underlying index. The fund was issued on Feb. 5, 2001, by BlackRock and has achieved an average annual return of 8.49% since its inception. IBB is managed by BlackRock Fund Advisors and charges an annual net expense ratio of 0.48%, which is slightly higher than the average expense ratio of its category. As of Oct. 31, 2015, IBB has a YTD return of 7.35%.

As of Nov. 13, 2015, IBB's top five holdings are 8.62% to Regeneron Pharmaceuticals; 8.45% to Amgen; 8.26% to Gilead Sciences; 8.11% to Biogen,; and 7.70% to Celgene. IBB holds 143 stocks, has total net assets of $7.96 billion and a trailing three-month average daily volume of 3.08 million shares.

First Trust NYSEARCA Biotech ETF

The First Trust NYSEARCA Biotech ETF (NYSEARCA: FBT) seeks to replicate the general price and yield performance of the NYSEARCA Biotechnology Index, the fund's underlying index. FBT is managed by First Trust Advisors L.P. and charges an annual net expense ratio of 0.58%, which is 0.13% higher than the average expense ratio of specialty-health funds. The fund was issued by First Trust Portfolios on June 19, 2006, and has achieved an average annual return of 19.45% since its inception.

As of Nov. 16, 2015, FBT has 30 holdings with a median market capitalization of $7.07 billion. With the fall of the biotech sector, FBT had a return of -17.45% between July 1, 2015 and Oct. 30, 2015. However, it has a YTD return of 2.42%. Although this fund is not as liquid than IBB or XBI, it is suitable for investors who are bullish on the biotechnology sector for 2016 and seek exposure to the NYSEARCA Biotechnology Index.

PowerShares Dynamic Biotech & Genome ETF

The PowerShares Dynamic Biotech & Genome ETF (NYSEARCA: PBE) seeks to provide investment results corresponding to the Dynamic Biotech and Genome Intellidex Index, the fund's underlying index. Under normal market conditions, it invests at least 90% of its total net assets in common stocks comprising the underlying index. The underlying index is composed of common stocks of 30 U.S. biotech and genome companies. Companies included in the index are primarily engaged in the research, development, manufacture, marketing and distribution of a variety of biotech products and services. It also includes companies that benefit from advances in the biotech and genetic engineering industry.

The fund was issued on June 23, 2005, by Invesco. PBE is managed by Invesco PowerShares Capital Management LLC and charges an annual net expense ratio of 0.57%. As of Oct. 31, 2015, PBE has generated an average annual return of 13.2% since its inception and a YTD return of 0.1%. Investors with a high risk tolerance who are bullish on the biotech sector for 2016 may look to hold PBE in a well-diversified portfolio.

BioShares Biotechnology Clinical Trials Fund

The BioShares Biotechnology Clinical Trials Fund (NASDAQ: BBC) was issued on Dec. 16, 2014, and is advised by Etfis Capital, LLC and subadvised by LifeSci Index Partners, LLC. The fund seeks to provide investment results corresponding to the performance of the LifeSci Biotechnology Clinical Trials Index, its underlying index. Its underlying index is an equal-weighted index designed to measure the performance of publicly traded, exchange-listed, U.S. biotechnology companies with products that is are Phase 1, Phase 2 or Phase 3 clinical trial stages of development.

Since the fund was newly issued in 2014, it has total net assets of just $24.7 million and an average daily share volume of 16,219 shares. It charges a high net expense ratio of 0.85%, while its category of specialty-health has an average expense ratio of 0.45%. Due to the biotech sector's entrance into bear market territory, BBC has a YTD return of -4.80% and a quarter-to-date return of -26.9% as of Sept. 30, 2015. Bullish biotech investors who are highly risk tolerant and believe a majority of the companies included in the index will get FDA approval on their products in 2016 may look to invest in BBC.

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