IXJ vs. IBBQ: Global Healthcare vs. Biotech -- Which ETF Is the Better Buy?

The iShares Global Healthcare ETF (NYSEMKT:IXJ) provides broad, established exposure to global healthcare giants, while the Invesco Nasdaq Biotechnology ETF (NASDAQ:IBBQ) offers a lower-cost concentrated bet on biotechnology.

Both funds give investors exposure to the healthcare sector. But while IXJ tracks a global index of healthcare stocks spanning multiple sub-industries, IBBQ zeroes in on biotech and pharma names listed on the Nasdaq.

Snapshot (cost & size)

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

IBBQ is the cheaper option for cost-conscious investors, charging a 0.19% expense ratio versus 0.40% for IXJ. But IXJ has the edge on income with a dividend yield of 1.47%, well above IBBQ's 0.79%.

Performance & risk comparison

What's inside

Launched in 2001, IXJ is built to mirror a global healthcare index, holding 110 positions. Its top holdings include Eli Lilly (NYSE:LLY) at 10.9%, Johnson & Johnson (NYSE:JNJ) at 7.0%, and AbbVie (NYSE:ABBV) at 5.1%.

IBBQ tracks the Nasdaq Biotechnology Index and casts a much wider net within its niche, holding 251 positions. Its largest holdings are Vertex Pharmaceuticals (NASDAQ:VRTX) at 8.1%, Amgen (NASDAQ:AMGN) at 7.9%, and Gilead Sciences (NASDAQ:GILD) at 6.9%. IBBQ was launched in 2021.

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

What this means for investors

The biggest difference between these two funds comes down to what kind of healthcare exposure you’re getting. IXJ spreads its bets across the full breadth of the healthcare industry, including large pharmaceutical makers, med-tech companies, health insurers, and other sub-industries that tend to generate steady, predictable cash flow. That shows up clearly in the numbers, with a five-year maximum drawdown of just 18% compared to IBBQ's 38%. For investors who want healthcare exposure without the stomach-churning swings, that stability -- paired with a higher 1.47% dividend yield -- is the main selling point.

IBBQ, on the other hand, is a bet on biotech specifically, not the broader healthcare sector. But that narrower focus is why it posted a much stronger 48% one-year return -- clinical trial results, FDA approvals, and M&A speculation can send biotech stocks soaring (or sinking) in ways that rarely happen to a company like Johnson & Johnson. In its favor, IBBQ does carry a lower expense ratio. But investors in the fund need to be comfortable owning a more volatile basket of stocks.

Neither of these ETFs is inherently better. It just depends on what an investor is trying to accomplish. Someone looking for ballast within a broader portfolio will likely lean toward IXJ's steadier income-generating approach. Someone chasing higher growth potential and who’s comfortable with sharper swings may find IBBQ's concentrated biotech bet more appealing. And, as always, sizing either position appropriately relative to your overall risk tolerance matters most.

Andy Gould has positions in AbbVie and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends AbbVie, Amgen, Eli Lilly, Gilead Sciences, and Vertex Pharmaceuticals. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.