- 1). Determine what percentage of your overall portfolio you wish to devote to early stage biotech firms. While the rewards of such funds can be great, these firms tend to carry above average risk as well. If a promising drug therapy or treatment technique does not pan out, the company, and the stock, could suffer an irreversible setback.
- 2). Contact the mutual fund company where you hold your investments. If you are not currently invested with a mutual fund company, consider low-cost firms like Vanguard, TIAA-CREF and Charles Schwab.
- 3). Ask about the biotechnology funds the firm offers. Most major mutual fund families offer at least a few funds whose investment goal is to seek out the best early stage biotechnology and pharmaceutical funds.
- 4). Review the prospectus for each biotechnology fund carefully to determine the level of charges and expenses associated with each fund. Since these funds are actively managed, they tend to have higher costs than index funds, but you should still be able to keep your expense ratio under 1.5 percent.
- 5). Complete the application for the fund you wish to invest in, then send the completed application and a check for your initial deposit to the address shown on the form. Be sure to send the form and the check to the right address -- some mutual funds use a separate address for overnight delivery.
- 6). Keep copies of all your transaction receipts. You will need these receipts to determine your cost basis and capital gain if you choose to sell your investment later on.