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Investing in the space sector can be tricky. But this is the best way

Jamie Cameron
16. 4. 2023
4 min read

The space industry has undergone tremendous development in recent years. For investors, this means an opportunity to participate in the promising growth of a "new" industry with huge potential. But how not to get burnt?

With the increasing use of satellite technology, the growth of space tourism and ambitious plans to conquer space and other planets, the commercial potential of this sector is growing

One of the best ways to invest in the space sector is through exchange-traded funds, or ETFs. This is because ETFs allow investors to gain broad exposure to the full spectrum of companies operating in the sector without having to pick individual stocks themselves. Investors can simply purchase ETF shares to gain exposure to dozens of companies, from rocket and satellite manufacturers to space infrastructure companies to space tourism bets. I will focus on ETFs that allow you to invest specifically in the space sector.

How to invest?

You can invest in the aerospace industry through several exchange traded funds.

U.S. Global Jets ETF $JETS+0.1%

This is a passively managed ETF that invests in the global airline industry. This fund tracks the performance of the U.S. Global Jets Index, which includes leading airline, aircraft manufacturing and related companies around the world. Major constituents of JETS include major airlines such as American Airlines, Delta Air Lines, and United Airlines, as well as aircraft manufacturers such as Boeing and Airbus.

JETS offers investors the opportunity to see the potential growth of the aviation industry through one fund. With fees of 0.75% per annum, JETS is a relatively low-cost solution for those wanting exposure to the industry.

Of course, it is not directly related to the space industry, but aviation is closely linked to it and can benefit from it extremely.

Ark Space Exploration & Innovation ETF $ARKX

ARKX is also a potential option, holding a portfolio of 35 to 55 companies involved in space exploration and innovation. ARKX divides its underlying stocks into four thematic categories: orbital aerospace, suborbital aerospace, fundamental technology and aerospace technology. The ETF is actively managed, meaning it does not track any index. Rather, the fund's management team has broad discretion to use fundamental and technical analysis to select and weight stocks. Currently, the ETF's expense ratio is 0.75%.

iShares U.S. Aerospace & Defense $ITA

iShares U.S. Aerospace & Defense invests in the top 40 companies in the U.S. aerospace and defense industry. Its largest positions include Lockheed Martin, Northrop Grumman and Raytheon, which are involved in space and defense systems programs. ITA offers investors exposure to the long-term growth of defense and aerospace spending in the United States.

ITA follows a passive investment strategy weighted by market capitalization and continuously adjusts to the composition of the MSCI U.S. Aerospace & Defense Index. With fees of 0.42%, this ETF is a low-cost and efficient way to gain exposure to the sector.

Historically, ITA has delivered solid returns, stable dividends, and low volatility due to the defensive nature of the sector. Investing in ITA can be suitable for both long-term and short-term positions given the fund's focus.

Procure Space ETF $UFO+0.7%

Procure Space ETF is the first global investment fund to focus exclusively on companies in the space industry. UFO invests in manufacturers of satellites, rockets, spacecraft and other technologies for commercial, government and military use. Its largest positions include SpaceX, Lockheed Martin, Northrop Grumman and MAXAR Technologies.

UFO provides investors with an innovative way to gain exposure to the growth of the commercial space sector. With fees of 0.75% per year, the fund is competitive for passive investments. UFO follows an investment strategy weighted by market capitalization and aligns with the composition of the Global Space Industry Index.

The prospect of growth in space tourism, the space transportation industry, space asteroid mining and other emerging markets may present an interesting opportunity for investors. However, returns and volatility are still high given the level of diversification due to the concentration on a few companies.

UFOs thus represent a riskier but potentially more lucrative exposure to the space industry for adventurous investors.

Disclaimer: This is by no means an investment recommendation. It is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.

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