Which Biotech ETF Is a Better Buy: Concentrated Bet or Broad Basket?

The Invesco Nasdaq Biotechnology ETF (NASDAQ:IBBQ) offers lower costs and broader market diversification, while the VanEck Biotech ETF (NASDAQ:BBH) provides a more concentrated investment in 25 leading biotechnology companies.

Both funds target the healthcare sector, specifically focusing on pharmaceutical and biotechnology firms involved in drug discovery. While they share several core positions, their index strategies differ significantly in breadth, with one fund selecting only the top 25 companies and the other capturing over 250 names across the Nasdaq market.

Snapshot (cost & size)

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 Invesco fund is notably more affordable with a 0.19% expense ratio compared to 0.35% for the VanEck fund. Additionally, the Invesco fund provides a higher payout with a 0.8% yield versus the 0.4% offered by its competitor.

Performance & risk comparison

What's inside

The Invesco Nasdaq Biotechnology ETF tracks the Nasdaq Biotechnology Index, holding 251 stocks within the healthcare sector. Its largest positions include Amgen (NASDAQ:AMGN) at 8.70%, Vertex Pharmaceuticals (NASDAQ:VRTX) at 8.27%, and Gilead Sciences (NASDAQ:GILD) at 7.12%. The fund was launched in 2021. Invesco Nasdaq Biotechnology ETF has paid $0.26 per share over the trailing 12 months, which on its recent ~$33.91 share price works out to a 0.8% yield.

The VanEck Biotech ETF follows the MVIS US Listed Biotech 25 Index, maintaining a much tighter basket of 25 holdings. Its top positions include Amgen at 16.29%, Gilead Sciences at 12.94%, and Vertex Pharmaceuticals at 8.76%. The fund was launched in 2011. VanEck Biotech ETF has paid $0.96 per share over the trailing 12 months, which on its recent ~$219.64 share price works out to a 0.4% yield.

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

Which looks like the better buy

Concentration cuts both ways in biotech, and this comparison shows why. IBBQ's 251-stock index means one clinical trial failure or FDA rejection barely moves the fund, while BBH's 25-stock portfolio still carries real company-specific risk despite looking diversified on paper. That structural gap shows up directly in the returns: broader exposure has meaningfully outpaced the concentrated bet over a full five-year stretch, even as both funds weathered comparable drawdowns during biotech's rougher stretches. The overlap in top holdings matters too, since if Amgen, Gilead, and Vertex are going to drive performance either way, the extra 226 names in IBBQ aren't diluting the winners so much as cushioning against the losers no one can predict in advance. BBH's higher fee and lower yield don't buy investors anything extra in exchange for that added exposure to single-company risk. Unless someone wants concentrated exposure to biotech's biggest names specifically, say, a bet that large-cap M&A activity keeps rewarding the sector's leaders, IBBQ fits better as a core biotech holding for most portfolios, especially for investors who want sector exposure without betting on which handful of drugmakers wins the next cycle.

Seena Hassouna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amgen, Gilead Sciences, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.