DEFINITION of 'Biotechnology Industry ETF'

An exchange-traded fund that invests specifically in the rapidly growing number of companies that combine biology and technology to develop innovative products and services. While products and services from such biotechnology companies are generally clustered in the area of healthcare, they may also be addressed at agriculture and the environment. As such, a substantial portion of a biotechnology ETF would consist of companies engaged in the development of drugs to combat various ailments.

BREAKING DOWN 'Biotechnology Industry ETF'

Depending on its size, a biotechnology company may have a number of products at various stages of development, ranging from initial feasibility to advanced clinical trials. As biotechnology stocks tend to be more volatile than the broad market, a biotechnology ETF would also exhibit similar volatile behavior.

By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order

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