Outer Space vs. Air Space Stocks: Is the ARKX ETF a Better Investment Than the JETS ETF?

Investors choosing between the ARK Space & Defense Innovation ETF (NYSEMKT:ARKX) and U.S. Global Jets ETF (NYSEMKT:JETS) must weigh a more expensive industrials-heavy basket against a pure-play airline focus.

Both funds target aerospace and transportation themes, yet they serve distinct roles for a portfolio. The ARK Space & Defense Innovation ETF pursues long-term capital appreciation through companies leading in orbital and sub-orbital aerospace, including those involved in satellite technology and defense systems.

In contrast, the U.S. Global Jets ETF provides targeted exposure to the global airline industry, encompassing commercial carriers, cargo flight operators, and aircraft manufacturers alike. This comparison looks at how their costs and performance profiles diverge.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The ARK Space & Defense Innovation ETF is the more expensive option, carrying an expense ratio of 0.75% compared to 0.6% for the U.S. Global Jets ETF. This difference reflects the higher cost often associated with the ARK fund's actively managed strategy.

Performance & risk comparison

What's inside

The ARK Space & Defense Innovation ETF portfolio leans heavily into industrials at 60%, followed by technology at 25%, and consumer cyclical at 10%. It currently holds 45 positions. Its largest positions include Space Exploration Technologies (NASDAQ:SPCX) at 10.99%, L3Harris Technologies Inc (NYSE:LHX) at 6.45%, and Kratos Defense & Security Solutions (NASDAQ:KTOS) at 6.06%. The fund focuses on businesses that are leaders in space exploration and innovation. It was launched in 2021.

The U.S. Global Jets ETF similarly holds 45 stocks but provides a narrower, specialized focus on global airline operators. It targets the global ecosystem of passenger and cargo flight. Its top holdings include Southwest Airlines Co (NYSE:LUV) at 11.05%, American Airlines Group Inc (NASDAQ:AAL) at 10.64%, and Delta Air Lines Inc (NYSE:DAL) at 10.59%. This concentration makes it highly sensitive to jet fuel prices and travel demand. It was launched in 2015.

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Which looks like the better buy

The ARK Space & Defense Innovation ETF (ARKX) and the U.S. Global Jets ETF (JETS) are very different funds. Their common link is a flight-based theme, with the former pointed toward the final frontier and the latter about terrestrial-bound movement in the skies. Choosing which to invest in depends on the factors that matter most to you.

ARKX is focused on disruptive innovation in space exploration and defense technologies. This holds the potential to deliver superior returns compared to JETS, as demonstrated by its greater total return over four years. Its expense ratio is higher because it's an actively-managed fund, so that's less of a drawback than the fact that its holdings contain speculative bets.

JETS is more for conservative investors, given its holdings target tried-and-true airline companies. Its dividend and lower expense ratio make it the more appealing ETF for those who want to hold for the long term. It also has a longer history for investors to gauge performance across various macroeconomic conditions.

Robert Izquierdo has positions in Southwest Airlines and Space Exploration Technologies. The Motley Fool has positions in and recommends Kratos Defense & Security Solutions and L3Harris Technologies. The Motley Fool recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.