Invesco Pharmaceuticals ETF vs State Street Biotech ETF: Which Fund Is the Better Buy in 2026?

Invesco Pharmaceuticals ETF (NYSEMKT:PJP) offers a less volatile, concentrated pharmaceutical focus with higher yield, whereas State Street SPDR S&P Biotech ETF (NYSEMKT:XBI) provides high-growth, equal-weighted biotechnology exposure at a lower cost.

Investors seeking healthcare exposure often choose between the higher volatility of biotechnology and the established stability of major pharmaceuticals. This comparison explores how XBI and PJP balance risk, total return, and diversification within the medical and life sciences sectors.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Invesco fund is more costly to hold with a 0.57% expense ratio compared to 0.35% for the SPDR fund. However, the Invesco fund provides a higher yield for investors who prioritize regular income distributions.

Performance & risk comparison

What's inside

The Invesco Pharmaceuticals ETF is a non-diversified fund that generally invests at least 90% of its total assets in U.S. pharmaceutical companies. Its portfolio of 30 holdings focuses on businesses involved in the research, development, and distribution of various drugs. Its largest positions include AbbVie (NYSE:ABBV) at 5.6%, Eli Lilly & Co (NYSE:LLY) at 5.4%, and Johnson & Johnson (NYSE:JNJ)at 5.3%. The fund was launched in 2005.

State Street SPDR S&P Biotech ETF follows the S&P Biotechnology Select Industry Index using a representative sampling technique. Its sector focus is also all healthcare, and its top holdings include Apogee Therapeutics (NASDAQ:APGE) at 1.5%, Moderna (NASDAQ:MRNA) at 1.4%,and Twist Bioscience (NASDAQ:TWST) at 1.36%. This portfolio contains 155 holdings. The fund was launched in 2006. State Street SPDR S&P Biotech ETF has paid $0.57 per share over the trailing 12 months, which, on its recent ~$163 share price, works out to a 0.30% yield.

Which fund is the better buy?

While both are healthcare ETFs, they differ notably in style and performance.

The Invesco Pharmaceutical ETF — PJP — has a concentrated focus just on drugmakers, which has allowed it to capitalize on the GLP-1 boom, led by its second-largest holding, Eli Lilly. It’s largely large-cap and small-cap stocks, with 86% of holdings evenly split between the two, with the balance in mid-caps.

The State Street SPDR S&P Biotech ETF — XBI — is 81% small-cap stocks and just 5% large-cap stocks, which has enabled it to profit from the best year for small-cap stocks since 1991. In addition to its 93% one-year gain, it has returned 24.1%, 3.3%, and 11.5% over the 3-year, 5-year, and 10-year time frames, respectively. PJP, meanwhile, lags XBI in every time frame but the 5-year, where it boasts a 9.1% annualized return.

XBI does come with a word of caution, though. It’s 54% maximum drawdown is a gut-wrenching drop, even if it is just on paper. Still, the long-term performance and the fact that it has been able to capture the small-cap rally, too, makes XBI the ETF to buy.

For more guidance on ETF investing, check out the full guide at this link.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Eli Lilly, Moderna, and Twist Bioscience. The Motley Fool recommends Johnson & Johnson, Kymera Therapeutics, and SPDR Series Trust - SPDR S&P Biotech ETF. The Motley Fool has a disclosure policy.