Which Biotech Mutual Fund to Consider: FBIOX or FBDIX? – November 8, 2019

The biotechnology sector has provided excellent returns so far this year. Mergers and acquisitions, initial public offerings, collaborative operations, and new job vacancies are among some of the factors propelling the space.

In fact, biotechnology is a good investment to hedge one’s portfolio in times of economic uncertainty. This is because products and services offered by the sector are always in demand, irrespective of market conditions.

Biotech Indexes Have Fared Well So Far in 2019

Major biotech indexes have had a decent run so far this year. Talking about returns, the SPDR S&P Biotech ETF (XBI), iShares Nasdaq Biotechnology ETF (IBB), ProShares Ultra Nasdaq Biotechnology (BIB) and NASDAQ Biotechnology Index (NBI) have surged 12.5%, 11.1%, 16.5% and 11.1%, respectively, on a year-to-date basis.

Therefore, one could consider purchasing mutual funds that invest in the space. However, choosing the right mutual funds for your portfolio can be cumbersome. Let us take a look at two biotechnology funds and discuss which of these is best suited for your portfolio.

Choosing the Right Fund

Fidelity Select Biotechnology Portfolio (FBIOX Free Report) fund seeks capital appreciation. The fund primarily invests its assets in securities of companies that are engaged in the research, development, manufacture and distribution of biotechnological products and services. In addition, these companies gain considerably from scientific and technological advances in biotechnology. FBIOX mostly invests in common stocks.

This Sector-Health product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 11% over the 3-year and 3.7% of the 5-year period. To see how this fund performed compared in its category, and other #1 and 2 Ranked Mutual Funds, please click here.  

The Fidelity Select Biotechnology Portfolio fund, as of the last filing on Sep 30, 2019, allocates its assets in the top two major groups — U.S. Equity and Non-U.S. Equity. Further, as of Sep 30, 2019, AbbVie Inc, Amgen Inc and Vertex Pharmaceuticals Inc were the top holdings for FBIOX.

This product with a Zacks Mutual Fund Rank #1 (Strong Buy) was incepted in December 1985 and is managed by Fidelity. FBIOXcarries an expense ratio of 0.72% and requires no minimal initial investment.

Franklin Biotechnology Discovery Fund Class A (FBDIX Free Report) aims for capital growth by investing the majority of its assets in securities of biotechnology companies and discovery research firms. These are companies involved in the areas of genomics, genetic engineering and gene therapy. The players may also operate in health care, pharmaceuticals and agriculture.

This Sector-Health product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 7.6% over the 3-year and 1.3% of the 5-year period. To see how this fund performed compared in its category, and other #1 and 2 Ranked Mutual Funds, please click here.  

The Franklin Biotechnology Discovery Fund Class A, as of the last filing on Sep 30, 2019, allocates its assets in the top two major groups — U.S. Equity and Non-U.S. Equity. Further, as of Sep 30, 2019, Amgen Inc, Vertex Pharmaceuticals Inc and Gilead Sciences Inc were the top holdings for FBDIX.

This product with a Zacks Mutual Fund Rank #3 (Hold) was incepted in September 1997 and is managed by Franklin Templeton. FBDIXcarries an expense ratio of 1.02% and requires a minimal initial investment of $1000.

Conclusion

Upon taking a closer look at FBIOX and FBDIX, we find that the former clearly outpaces. First, FBIOX has provided investors with higher returns over the three- and five-year periods. Second, FBIOX has a lower expense ratio than FBDIX, which means that its operational expenses are much less than the latter. Finally, FBIOX has no minimum initial investment, which offers flexibility to its investors. Therefore, one should definitely opt for FBIOX as an addition to their mutual fund portfolio.

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