The best ETFs for betting on biotech

"How can you make money in biotech? Well, you could bet on any of the tiny stocks that claim to have a sure-fire winning discovery. But most of the time these bets don't work out. You can easily lose your shirt, in fact.

"A better way is to bet on the entire sector - and exchange traded funds (ETFs) are a great way to do it. Currently there are six biotech ETFs. Each has its own particular portfolio methodology. Here's the full list:

iShares Nasdaq Biotechnology (NYSE: IBB)
SPDR S&P Biotech (NYSE: XBI)
Biotechnology HOLDRs (NYSE: BBH)
First Trust Amex Biotechnology Trust (NYSE: FBT)
PowerShares Dynamic Biotech & Genome (NYSE: PBE)
PowerShares Global Biotech (NASDAQ: PBTQ)

"Which should you buy if you want to get involved in biotech? That's your decision. All these ETFs have advantages and disadvantages. I'll give you a couple of pointers, though.

"If you intend to trade actively, trying to capture the biotech sector's short-term dips and rallies, IBB is the most liquid ETF in this space. If you are investing for the long term, XBI has a good mixture of solid large-cap biotech stocks with promising small companies.

"Remember: This is a volatile sector. Biotech stocks can make sharp moves in either direction in the blink of an eye. So don't trade with money you can't afford to lose. If you're willing to speculate, though, biotechnology can spell opportunity both now and in the future. Do your homework, and you can unlock the potential."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.