The space industry, once a distant frontier, is now accessible to investors thanks to advances in technology and a surge in commercial interest.
The sector presents substantial upside potential, highlighted by aerospace and defense company Rocket Lab USA Inc. (NASDAQ:RKLB), with its stock surging approximately 15% on Jan. 3. And, with growing anticipation for SpaceX's Falcon 9 launch in 2025, interest in space-focused ETFs is gaining momentum. This is evident from the ARK Space Exploration & Innovation ETF (NYSE:ARKX), which hit a 52-week high on Jan. 6.
Here are some ETFs in the space race that are in focus as the above trends dominate the center stage.
ARK Space Exploration & Innovation ETF, which invests 10.08% of its assets in Rocket Lab, focuses on companies involved in space exploration and innovation. This actively managed fund allocates 80% of its assets to this theme. With an expense ratio of 0.75%, ARKX has benefited from an overall optimism in the space sector. The fund's price has grown more than 17% in the past year.
iShares U.S. Aerospace & Defense ETF (BATS:ITA) currently allocates 1.89% of its holdings to Rocket Lab. Moreover, among its top holdings in this area are stocks like Boeing Co (NYSE:BA), RTX Corp (NYSE:RTX) and GE Aerospace (NYSE:GE). The expense ratio of 0.40% makes it one of the cheaper ETFs to consider.
SPDR S&P Aerospace & Defense ETF (NYSE:XAR) charges only 0.35% expense ratio in exchange for a portfolio of stocks like Rocket Lab (5.34%), Boeing (4.45%), RTX (4.22%), and AeroVironment (NASDAQ:AVAV) (4.59%). It allocates 100% of its assets to the aerospace and defense sector.
The space sector, although brimming with potential, does not come without risks. If we reflect on last year, the sector's volatility is evident in the Virgin Galactic fiasco, in which the stock price plummeted 99.3% from its 2021 highs. However, space ETFs allow investors to approach their investments in this sector in a balanced way.
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