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State Street SPDR S&P Pharmaceuticals ETF (NYSEMKT:XPH) provides broad, low-cost exposure to the pharmaceutical industry, while First Trust NYSE Arca Biotechnology Index Fund (NYSEMKT:FBT) offers concentrated biotechnology exposure with a history of higher returns.
Investors seeking targeted exposure to the healthcare sector often choose between biotechnology and pharmaceuticals. Both funds track life sciences companies, but they differ in their degree of concentration, sub-sector focus, and expense structures, providing distinct risk-reward profiles for those looking beyond a broad healthcare index fund.
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The SPDR fund is more affordable than its counterpart, with an expense ratio of 0.35%. This is 20 basis points lower than the 0.55% fee charged by the First Trust fund.
State Street SPDR S&P Pharmaceuticals ETF allocates 100% of its portfolio to the healthcare sector and currently holds 62 positions. Its largest positions include Veradermics (NYSE:MANE) at 2.86%, Xeris Biopharma Holdings (NASDAQ:XERS) at 2.76%, and Pacira Biosciences (NASDAQ:PCRX) at 2.51%. The fund was launched in 2006.
First Trust NYSE Arca Biotechnology Index Fund also focuses exclusively on the healthcare sector but maintains a much more concentrated portfolio of 30 holdings. Top positions include Genmab (NASDAQ:GMAB) at 4.89%, Regeneron Pharmaceuticals (NASDAQ:REGN) at 3.95%, and Halozyme Therapeutics (NASDAQ:HALO) at 3.77%. The fund was launched in 2006.
For more guidance on ETF investing, check out the full guide at this link.
Healthcare has been making plenty of headlines lately, from the boom in GLP-1 weight-loss drugs to a busy stretch of biotech acquisitions. For long-term investors heading into 2027, the State Street SPDR S&P Pharmaceuticals ETF (XPH) looks like the better way to play it. It costs less than First Trust's biotech fund, holds roughly 60 companies, and pays a small dividend.
XPH is not a big-pharma fund, though. Its equal-weight approach gives smaller drug developers as much influence as the giants, and it has taken deep drops in the past. That makes for a bumpier ride than the name suggests. Still, owning twice as many companies as FBT means one failed trial hurts less, and the smaller names give it room to run when bigger drugmakers come shopping.
FBT owns about 30 biotech companies in equal amounts, has the stronger long-term record, and pays no dividend. It works best as a smaller add-on for those seeking additional biotech risk. XPH's lower fee and broader lineup make it the better core holding for most long-term investors.
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Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Genmab A/s and Regeneron Pharmaceuticals. The Motley Fool has a disclosure policy.
Drug Makers or Biotech Bets: Which ETF Is the Better Buy, State Street's XPH or First Trust's FBT? was originally published by The Motley Fool
