THE BIOTECHNOLOGY industry's mission is to advance the well-being of life on earth through developments in technological processes that support advances in health of all forms.

Biotech applications range within industries including medicine, agriculture, industrial processes and environmental sustainability, to name a few.

In the wake of the pandemic, the emergence of the COVID-19 vaccine put a spotlight on mRNA biotechnology used by pharmaceutical companies as they raced to develop vaccines to fight off the coronavirus. Biotech companies like Moderna (ticker: MRNA) and BioNTech (BNTX) used mRNA technology to quickly research, develop, produce and administer the vaccine.

Like mRNA, there's a demand for other therapies to address cases that span from chronic illnesses to infectious diseases and global issues from food security to clean energy. These are some of the many drivers that could increase the industry's market size and yield investment opportunities.

The Nasdaq Biotechnology Index, which includes securities from biotech and pharmaceutical companies, returned about 36% year over year, outperforming the S&P 500's year over year return of 13%. With positive historical industry performance and promise for continued growth, here are the basics you need to know before investing in the biotech industry:

• Technology is the biotech market.
• Investing in biotech stocks.
• Investing in biotech exchange-traded funds.

Technology in the Biotech Market

Technology is a positive disruptor in biotech and plays an integral role in improving the sector.

The biotech industry is driven by data coming in from a variety of outlets such as health care transactions, patient biological data, research and development, among others. The management of data sets is dependent on efficient systems that can help biotech professionals assess them to ultimately find ways to develop headways in things like personalized medicines or therapeutics.

"It is improving how we collect the data during vaccine studies and assessing the diagnostics and treatment being used when taking certain medications," says Allison Ostrander, director of risk tolerance for SimplerTrading.com, on discussing how technology has been changing the biotech market landscape.

Sifting through loads of data can be overwhelming for researchers. By being able to advance how we gather and review the data, Ostrander says, this should help streamline and create a better diagnosis for patients.

Artificial intelligence, or AI, and "machine learning" capabilities help reduce these challenges while increasing efficiencies. AI plays a key role in biotech by pushing innovations in gene editing, gene therapy, and billing and payments. AI capabilities can help professionals make more accurate decisions, help prevent fraud and increase productivity.

"As we progress further toward precision medicine and therapies intended for use at a molecular level, companies need stronger data analytics, automation and artificial intelligence capabilities in conjunction with their science," says Nina Deka, senior research analyst at ROBO Global in New York City.

"We're seeing companies like Moderna and Cellectis (CLLS) progress their R&D in a fast and scalable manner because they have deployed these high-tech capabilities in combination with their innovative new scientific modalities," Deka continues.

Mainstream biotech uses have been growing as a result of consumers' appetite for on-demand health services. As people are becoming more health-conscious, companies are bringing more wearable technologies to market. These devices are easily accessible by connecting them on a smartphone or wireless device. Their accuracy is still improving, but their applications often play an important role in maintaining everyday health.

The marriage of biology and technology is one that is here to stay.

Investing in Biotech Stocks

Investors looking to generate high returns may turn to biotech investments. That said, the sector is volatile and comes with unique risks. Investors must do their due diligence by researching and evaluating any stock before considering biotech investments.

"The biotech industry tends to attract investors when it is most overvalued and scares investors when it provides the most opportunity," says Dr. Selena Chaisson, director of health care investments at Bailard, a boutique wealth and asset manager based in San Francisco.

In Chaisson's experience, few biotech stocks perform in a perfectly linear fashion. "Chasing a stock simply because it is performing well is seldom worth the effort," she says.

Several breakout biotech stocks in 2020 include Amgen (AMGN), AbbVie (ABBV) and Gilead Sciences (GILD). While these companies are strong players in biotech, market participants are eyeing other opportunities.

"I am very much a technical trader off my charts. With that in mind, I like Ligand Pharmaceuticals (LGND)," Ostrander says.

With a current market value of about $179, and a one-year return of more than 79%, LGND seems to have potential.

Ostrander says LGND is showing some longer-term buy signs when considering a monthly chart. She explains that if the stock can hold a market price of more than $156 in January then, Ostrander says she likes the idea of a longer-term bullish trend setting up.

Investing in Biotech ETFs

Investors who are interested in biotech investments but don't want to take on concentrated risk by investing in individual stocks can turn their attention to the many biotech ETFs available.

"It's important to be diversified because a lot of different areas are working together to progress innovation. So, if you're only in biotech, you may be missing out on genomics and data analytics," Deka says.

"Because of the dynamic relationships across these different industry subgroups, investors would be wise to consider a diversified health care innovation (ETF)," Deka explains.

Deka recommends the ROBO Global Healthcare Technology and Innovation ETF (HTEC). She say this fund's strategy is research-driven and it's frequently updated to ensure the inclusion of the most innovative companies in health care.

HTEC accounts for nine subsectors, made up of precision medicine, genomics, data analytics, robotics, telehealth and more.

One ETF that tracks the Nasdaq Biotechnology Index is the iShares Nasdaq Biotechnology ETF (IBB). The fund has an expense ratio of 0.46% and, at the time of this writing, carries a market value of about $159 per share. Its top three holdings are Amgen, Gilead Sciences and Moderna.

For a lower-cost fund option, an investor can look at the Fidelity MSCI Health Care Index ETF (FHLC). The fund carries an expense ratio of 0.08%, has a market value of $59 per share and boasts a one-year return of about 18%. Its portfolio includes a more evenly distributed exposure across the health care industry, with health care equipment and supplies having about 26% exposure, pharmaceuticals at about 25% and biotechnology at about 19%, among other industries.

There are many changes investors can anticipate in the biotech market in both the short and long term. As the industry is harnessing new technologies to develop solutions, don't be surprised to see more activity with biotech companies collaborating or merging to fuel further innovation and business growth in 2021.

This article was originally published By Paulina Likos, money.usnews.com.