Some investors today like the idea of biotech mutual funds. Biotech mutual funds can provide a very good return on investment however they can be risky. For the purposes of this article we will be looking at biotech mutual funds to understand the potential risks and rewards.
What Are Biotech Mutual Funds?
Biotech mutual funds are offered by mutual fund investment firms that specialize in investing into biotechnology companies. Biotechnology companies research the possibilities of applying the use of living organisams into such fields as technology, engineering and medicine. Biotech compnaies look at manipulating living organisms to fit human needs. The UN Convention on Biological Diversity (CBD) describes biotechnology thus:
Any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use.
Biotechnology is a very exciting area of study that promises enormous benefits to human beings but research is slow, expensive and does not offer guarantees that a particular line of research will be funded enough to deliver success. As a result of this, and due to the fact that many biotechs are incredibly complex and therefore hard to understand, direct biotech investments may not appeal to all investors… biotech mutuals however, although still risky, offer a little more security.
Biotech Mutual Fund Risks
There are some risks that need to be considered when thinking about biotech mutual fund investment, however there is less risk than buying specifically into one or a few biotechs. Biotech mutual funds tend to underperform the S&P 500 and can cost you in management fees. But biotech mutuals can spread risk and may make reasonable returns over the long term.
Investing In Biotech Mutual Funds
As with any investment the value of your investments can decrese very rapidly, especially if you do not know what you are doing. Always take advice from someone who is suitably qualified before investing in biotech mutual funds and never invest more than you can afford to lose.