Biotech bundles are a good way to moderate your risk

The motley fool

Do you want to invest in an exciting and growing sector? Think about biotechnology, where groups of companies (such as Amgen, Moderna and Gilead Sciences) are developing innovative therapies, some of which will be game-changing.

There are big drawbacks to investing in biotech stocks, however: many are very risky, stocks can be quite volatile, and it’s difficult to assess them if you don’t have a higher science degree. Fortunately, you can reduce the level of risk and volatility by investing in exchange-traded funds that focus on the biotech industry.

ETFs are similar to mutual funds in that they can hold many stocks (and sometimes other assets), but like stocks, they trade on public exchanges. Like mutual funds, ETFs charge a fee (often called expense ratios) to cover their operating costs.

Here are some strong biotech-focused ETFs to consider: iShares Biotechnology ETF, SPDR S&P Biotech ETF, ARK Genomic Revolution ETF, First Trust NYSE Arca Biotechnology Index Fund and ETF VanEck Biotech.

You can (and should) research all the ETFs that interest you, learn more about their fees, portfolios, and track record, among others. the Morningstar.com and ETFTrends.com sites are a good place to start, as is each ETF’s own web page. You can read more about ETFs (and mutual funds) in the “Investing Basics” corner at Fool.com.

Ask the fool

From TG to Billings, Mont. : A stock I bought fell and I see no explanation in the news. What’s up?

The madman replies: Individual stocks, like the stock market as a whole, do not move in a straight line. Over long periods of time, the stock market has always risen but via a jagged line. Individual stocks will also be volatile to some extent, although stocks of successful companies rise in the long run and those of less successful companies either fall or fall.

Stock prices will rise or fall overnight due to company news (big profits!), Economic news (a pandemic!), Some other reason, or sometimes due to ‘no reason at all. Stock prices basically reflect what investors are willing to buy and sell at that time – and investor sentiment can change quickly.

Long-term investors don’t have to worry about short-term moves. Focus on your confidence in a company’s prospects and the real value of its actions. The prices that matter most are the price at which you bought and the price at which you ultimately sell.

From PL to Lawrence, Kan. : How much will health care cost when I retire?

The madman replies: The estimate increases every year. According to Fidelity Investments, an average 65-year-old couple retiring in 2021 will spend around $ 300,000 on health care in retirement, excluding costs such as long-term care, most dental expenses, and drugs. on sale. Of course, many of us can end up spending a lot more or a lot less. Either way, this shocking number is a good reminder to plan for the heavy costs of health care in retirement. From the age of 65, Medicare is a big help, but even with it you will probably still have some personal expenses.

School of fools

The Federal Reserve Bank, which is a key driver of interest rates, has signaled that rates may rise soon, in part to fight inflation. Here’s how higher rates could affect you, positively or negatively.

For starters, higher rates mean you’ll pay more when you borrow money, like on a mortgage or car loan. Credit card interest rates will also rise – and they are already quite high, with average card rates recently approaching 16% and many cards charging a lot more. Paying off debt always makes good sense, and that’s especially important now.

Note that even if mortgage interest rates double from where they are now – 2% to 3% is typical – they will be far from historically high levels. Still, rising rates will mean higher mortgage payments for home buyers, and they could also force buyers to settle for cheaper homes. Borrowers with variable rate mortgages are likely to see their rates increase over time. Some homeowners may want to consider refinancing their home loans now to lock in the current low rates.

Rising rates also mean that those who save money will benefit from more generous interest rates on their various bank accounts, certificates of deposit, money market accounts and bonds. The prices of existing bonds will likely take a hit because bond buyers will prefer to buy new bonds that carry higher interest rates.

Rising interest rates can dampen stock market performance, in part because alternatives to stocks, such as bonds, will look more attractive as rates rise. In addition, companies that borrow money by issuing bonds will have to pay more interest on these loans. (We’ve been through a very long time with ultra low interest rates, and the stock market has performed very well for much of that time.)

When borrowing costs rise, it can slow overall economic growth, as businesses (and consumers) can spend less, which depresses corporate profits. However, certain types of businesses, such as financial companies, will benefit from rising interest rates.

My dumbest investment

From G., online: My dumbest investment was to buy 5,000 Apple shares at $ 23 a share and sell them at $ 26.

The madman replies: Ouch, it’s a painful regret. We don’t know when your buying and selling occurred, but due to the stock splits that have taken place, if you had held on you would have a lot more stocks – each recently priced at almost $ 176.

If your trading took place before the August 2020 4-for-1 split, you would have 20,000 shares, recently valued at $ 3.5 million. If this happened before the 7-to-1 split in June 2014, you would have seven times 20,000, or 140,000 shares, with a recent value of almost $ 25 million. And if that happened before 2-for-1 split in June 2000 and 2-for-1 split in February 2005, you would have 560,000 shares worth almost $ 99 million.

While that might seem like a very stupid investment decision now, let it go: no one could have known, at various times in the past, how incredibly well Apple would do. Still, it’s a great example of the power of holding onto the stocks of companies you believe in that continue to grow and perform well. Also, keep in mind that stock splits aren’t as exciting as they seem, because even though they can suddenly multiply the number of stocks you own, stock prices are reduced proportionately. The splits are mainly math exercises.

Who am I?

My roots go back to 1940, when two brothers opened a barbecue restaurant in California. In 1948, they switched to selling 15-cent burgers and made their restaurant more efficient through their “Speedee Service System”. In 1954, a visiting salesman was impressed. In 1961, he bought the rights to their name and operating system. Today, based in Chicago, I am a quick service powerhouse, with nearly 40,000 locations worldwide and a recent market value of nearly $ 200 billion. At the end of 2020, I employed around 200,000 people and over 2 million people worked for my franchises. Who am I?

Can’t remember the question from last week? Find it here.

Trivia response from last week: Campbell Soup Co.


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