Biotech Funds: Enter With Care

Investors in biotech have the potential to reap tremendous rewards, but at the same time, the risk can be enormous -- sometimes in the same stock.

For example, an investor in Neurocrine Biosciences (NBIX Quote) could have gotten into the stock below $5 in 1999. Neurocrine topped out at $73 in March of this year.

However, after the FDA failed to approve its insomnia treatment Indiplon and after partner Pfizer (PFE Quote) walked away from the drug, Neurocrine's stock crashed, closing Wednesday at $9.23.

Mutual funds have long been a preferred method for investors to diversify their holdings, but there aren't too many biotech-oriented options. I found 10 funds that invest most of their assets in biotech. Several others have significant exposure to the sector but also invest heavily in medical devices, pharmaceuticals and health care stocks. ...