Biotech ETF's Diversity Reduces Risk

| About: iShares Nasdaq (IBB)

Pharmaceutical companies are feeling pressure from Congress to lower the price of drugs for Americans. Even though this has had a slightly negative effect on bigger pharmaceutical companies, biotechnology stocks in general look strong. In fact, it's been the best performing sector in the past two weeks. The iShares Nasdaq Biotechnology Index Fund (NASDAQ:IBB) is a biotech ETF whose top holdings are: Amgen (NASDAQ:AMGN) 14%; Gilead Sciences (NASDAQ:GILD) 6%; Celgene Corp (NASDAQ:CELG)5%.

James B. Stewart of wrote that Pfizer's (NYSE:PFE) recent pullout for clinical trials of Torcetrapid sparked his interest of the plight of pharmaceutical drugs. After all, drug companies paradoxically are so vital and sought after by so many, yet can be vilified and blamed for all that goes bad. The Congressional hearings for Merck's (NYSE:MRK) Vioxx, another paradox, when Merck had voluntarily pulled the drug, yet the public pleaded for it despite the ill-effects some had experienced. These are reasons it is a better call to diversify and invest in an ETF rather than one company, particularly in the pharma/biotech sector. This way your investment doesn't plummet as a result of lawsuit losses.

IBB 1-yr chart: