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Healthy Biotech and Pharma ETFs

Before the first ballot was cast in the 2008, Obama's quest for health care reform caused havoc in the sector and among health care ETFs like iShares Nasdaq Biotechnology (IBB) and HOLDRS Merrill Lynch Pharmaceutical ETF (PPH).

Government plans to extend health care to the uninsured and cut costs could certainly hinder major health care companies such as Amgen (AMGN) and Gilead (GILD), as lower costs cut into profits. Some analysts, however, believe that the influx of people into the heath care system and the bubble of aging baby boomers could make up for setbacks caused by reform.

ETFs provide access to a number of health care sectors, including biotech and pharmaceutical, giving investors a variety of approaches to diversify their portfolios. After surveying ETFs in both the biotech and pharmaceutical subsectors, IBB and PPH have emerged as two strong selections in a field of strong competitors.

The chance of any one biotech firm developing the next blockbuster drug are similar to the odds of moving to Hollywood and starring with Angelina Jolie in your first movie. That's not to say that biotech isn't a good place to have a small position -- biotech firms that make it do make it big and the reward for this sector is as high as the risk.

There is a broad range of biotech ETFs to choose from. The SPDR Biotech (XBI) and PowerShares Dynamic Biotech & Genome (PBE) funds offer investors balanced exposure to a broad range of biotech firms with an emphasis on small-cap companies. iShares Nasdaq Biotechnology (IBB) and Biotech HOLDrs (BBH) give investors exposure to the biggest names in the business.

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