Biotech Portfolio Strategy: Is Biotech a Good Investment?

July 16th 2024,

As someone who works in BioTech, Life Sciences or Pharmaceuticals, you obviously know what the industry entails. Your insider’s view is that of a professional who contributes daily to the sector, providing essential services. In this article, we encourage you to look at BioTech from a different perspective, as we answer the question, “Is BioTech a good investment?” Think about BioTech, not as your work, but as an investment that you could include in your portfolio. As you think about diversifying that portfolio, consider whether it is worth directing at least some of your funds toward BioTech. Like any other investment, it has benefits and risks. If you decide to invest in this sector, it is important to have an expert on your side to provide professional BioTech portfolio management.

When factoring healthcare into your investment portfolio, remember that it is primarily a defensive sector. This means that it provides stable earnings that are not really correlated to the overall stock market or economy. As a result, healthcare and related stocks, such as BioTech, Pharma and Life Sciences, often outperform other stocks when the market is weak or the economy is going through a slow or retractive phase. Therefore, as many investors and market analysts agree (as demonstrated in this article from U.S. News) BioTech has the potential to yield relatively high rewards compared to other investments.

With all that being said, we should also note that no investment is without risks, and the BioTech sector and other areas of healthcare are no exception. Healthcare is particularly susceptible to regulatory risk. The regulatory demands can have significant effects on the results of investments in this sector. These include the need for clinical trials, price caps and cost control, among others. They should not be seen as a deterrent, however, but merely taken into account when devising a portfolio strategy.

Careful portfolio management is vital for investment in any healthcare-related field, from BioTech to Pharma. This service involves the work of a dedicated family CFO who uses both personal expertise and cutting-edge technology. The benefits of BioTech or Pharmaceutical Portfolio Management include:

• Accurate monitoring and data-driven discernment: Portfolio management software accurately collects and analyzes data that helps wealth managers identify which stocks and products are doing well. It becomes much easier to direct funds to high-performing stocks and cut losses where necessary.
• Ensure strategic alignment: With the help of a professional wealth manager, a BioTech investor can gain a more comprehensive view of their portfolio. This broader perspective can help to identify those stocks and products that align with the overall investment strategy (and those that do not), and make more informed investment decisions.

Managing investments in any sector involves the careful collection of data and the ongoing assessment of risk and reward. Doing this in the BioTech sector requires a good deal of industry knowledge, as well as a deep understanding of a particular device or IP. Healthcare professionals are a considerable advantage in this regard, but that does not necessarily mean that they will be successful investors. They need to view their industry from a different perspective. A wealth manager will view the sector through the lens of risk assessment. BioTech has a different risk profile than other investment options. Whereas most other sectors have a high level of marketing risk, the primary risk area in BioTech and Pharma is in the area of development. Investing in BioTech involves a careful balancing of the potential benefits of BioTech products with the difficulties involved in launching them to market.

Every investment portfolio rests on careful risk management. As mentioned above, managing risk in BioTech investments often means taking research, development and funding risks into account. A brilliant technological innovation has the potential to reap incredible rewards once it goes to market. The risk lies in the possibility of a failure to launch. For example, funding challenges can prevent even the best ideas from ever being developed. Others may make it to market only to fail in the early stages of clinical application. Still others may make it past the initial phases before falling flat in the commercial arena. These are risks that BioTech investors should always be aware of. 

The best way to manage this kind of risk is through diversification. Investors should place their money across a variety of stocks and products. Thankfully, the risks involved with the development of specific BioTech products can be offset because you would generally invest in a company or a stock, rather than in one particular product. You would also spread your investments across several different companies and stocks, further helping you to improve your chances of success and offset potential risks.

Is BioTech a good investment? Yes, provided you have an investment expert on your side. LRVS Advisory offers professional wealth and financial management advice to professionals in the Life Sciences, BioTech and Pharma industries. If you need help building long-term wealth, and creating a successful Biotech portfolio strategy to help protect and grow your assets, contact us and speak to one of our experienced family CFOs.

*Disclaimer:

This article is provided by McAdam LLC dba LRVS Advisory Group for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this article is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax, or legal advice. Certain information contained in this report is derived from sources that McAdam believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.

Any references made regarding the taxable nature of your investments should not be construed as tax advice. McAdam LLC is not a tax advisory firm; therefore, any tax decisions or assumptions should be made/verified with your tax professional.

Projected savings presented may vary depending on client longevity, and performance of assets over time.

This article is the sole opinion of this individual and is not indicative of the firm’s belief.

Purshe Kaplan Sterling Investments and McAdam LLC dba LRVS Advisory Group are not affiliated companies. This article is provided by McAdam LLC dba LRVS (for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this article is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in this report is derived from sources that McAdam believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.