Despite the risks of investing in biotechnology, some biotech stocks experience a dramatic increase in price. If you think you’ve made such a find, Houston financial advisors Richard J. Alphonso, JD, CPA, M.S.T. and Steven A. Estrin, M.B.A., recommend considering these questions before you invest:

1. Is there a need for the product? Evaluate the likelihood of its acceptance by the medical community.

2. Does the company have a competent, motivated management team? Bad management can kill a good product.

3. What are the risks of competition? Is it a "me-too" product? Consider reserving your investments for patented products or those that will be tough to replicate.

4. Does the company have adequate capitalization? Make sure it has enough resources to bring its product to market.

5. Are you confident that the information you have isn’t already reflected in the company’s current stock price? Ask your financial advisor to do a little digging.