How to Invest in ARK Space Exploration & Innovation ETF

Cathie Wood's stock picks receive considerable scrutiny, but investors are also acutely focused on the exchange-traded funds (ETFs) that ARK Invest manages, such as the ARK Space Exploration & Innovation ETF (ARKX -1.53%).

Launched in March 2021, the ARK Space Exploration & Innovation ETF is an ideal opportunity for investors looking to benefit from the burgeoning space economy. The consulting firm McKinsey projects that the space economy could soar from $630 billion in 2023 to $1.8 trillion by 2035.

What is it?

What is ARK Space Exploration & Innovation ETF?

One of several ETFs under the umbrella of ARK Invest's products, the ARK Space Exploration & Innovation ETF is focused on providing exposure to companies operating in the final frontier. According to ARK Invest, the fund "seeks to provide exposure to companies involved in space-related businesses like reusable rockets, satellites, drones, and other orbital and sub-orbital aircrafts."

Operating in space is no small feat, so almost all the companies represented in the ETF are associated with advanced technologies. About 42% of the stocks in the ETF, for example, are leaders in autonomous mobility (the largest sort of tech in the fund), followed by intelligent devices and 3D printing, representing 18% and 13%, respectively.

Large-cap stocks (defined by ARK Invest as those with market capitalizations of $10 billion to $100 billion) are the most common type found in the ETF, representing 42% of the portfolio. Medium-cap stocks (market caps of $2 billion to $10 billion) and mega-caps (market caps with more than $100 billion) are the next most common. Medium caps represent 31%, while mega caps represent 13% of the ETF.

Although the ETF includes both telecommunications and consumer discretionary stocks, industrials and information technology stocks account for most of the ETF, representing 54% and 26%, respectively.

How to buy

How to buy ARK Space Exploration & Innovation ETF

Whether you have or haven't taken flight with an ETF investment, there are some elementary steps to gain exposure to ARK Space Exploration & Innovation ETF, which trades under the stock ticker ARKX.

Step 1: Open a brokerage account

Congrats on your interest in building personal wealth through investing in stocks. Opening a brokerage account is at the top of your to-do list. There is an assortment of options to consider, but Fidelity, with its $0 commission for online stock trades, is a common consideration for new investors.

Step 2: Figure out your budget

Achieving success in investing requires many things, but one of the most important is careful management of one's finances. Before clicking the buy button, it's important to create a budget, being mindful of monthly expenses and allowing for the funding of savings accounts.

Step 3: Do your research

Another critical step for investors is doing their due diligence. It's time to put the ARK Space Exploration & Innovation ETF under the microscope to see whether it's as attractive as you thought before placing it under greater scrutiny.

Step 4: Place an order

With your research completed, you're ready to add the ARK Space Exploration & Innovation ETF to your portfolio. After entering the ETF's ticker (ARKX for the ARK Space Exploration & Innovation ETF) and choosing to buy the stock (instead of sell), you must decide whether to place a market order or a limit order.

Now, you'll have to identify the size of your purchase -- deciding whether you want to buy a fractional share, a single share, or hundreds of shares. The image below shows the process for buying stock through Fidelity.

Holdings

Holdings of ARK Space Exploration & Innovation ETF

As of May 2024, the ARK Space Exploration & Innovation ETF had 35 holdings in the fund. The top 10 holdings in the fund reflect a variety of businesses, while the top three positions alone represent more than 25% of the ETF's holdings.

A leading drone stock, AeroVironment (AVAV -0.12%) is the largest holding in the ETF, with a 9.5% weighting, followed by Kratos Defense & Security (KTOS -1.47%), which also specializes in developing drones and is a notable defense contractor. Satellite company Iridium Communications (IRDM -1.89%) is the third-largest position, with an 8% weighting.

The fourth-largest holding in the ARK Autonomous Technology & Robotics ETF (ARKQ -1.04%) and the ARK Space Exploration & Innovation ETF is positioning technology stock Trimble (TRMB -1.63%), with a 6.8% weighting.

Teradyne (TER -1.75%), a provider of automation solutions for the semiconductor industry, represents the fifth-largest holding, with a 5.9% weighting, while L3Harris Technologies (LHX -0.79%) stands as the sixth-largest position, with a 5.2% weighting. In addition to building satellites for the military, L3Harris develops rocket engines for space exploration.

Should I invest?

Should I invest in ARK Space Exploration & Innovation ETF?

Sadly, there's no answer as to whether the ARK Space Exploration & Innovation ETF is a smart investment for every investor. The best ETF choice for some people may be an unwise selection for others. But there are some factors investors can consider to help decide whether the ARK Space Exploration & Innovation ETF is right for them.

For one, the ARK Invest ETF is a smart choice for those eager to gain exposure to a growth industry. The space economy is expected to grow considerably in the coming years. Consequently, the space-focused ETF could be a smart choice for investors with longer investing horizons and the patience to let the space economy develop.

Another consideration is the amount of risk investors are willing to accept. Investing in a single space stock could be a speculative investment that ends up earthbound instead of soaring through the stratosphere. Choosing an ETF with 35 holdings, on the other hand, helps to mitigate the risk of a single space stock failing to launch.

Investors often look to ETFs as another way to supplement their passive income streams. Currently, the ARK Space Exploration & Innovation ETF doesn't provide investors with a distribution, so if collecting dividends is at the top of your priority list, it is not right for you.

Dividends

Does ARK Space Exploration & Innovation ETF pay a dividend?

Investors looking to boost their passive income streams with a dividend ETF will have to look elsewhere since the ARK Space Exploration & Innovation ETF doesn't pay a dividend as of May 2024. In fact, investors committed to a Cathie Wood-backed ETF will find that they're out of luck since ARK Invest ETFs don't pay dividends.

Expense ratio

What is ARK Space Exploration & Innovation ETF's expense ratio?

It may not cost as much as a ticket for a ride on one of Virgin Galactic's sub-orbital spacecraft, but owning the ARK Space Exploration & Innovation ETF will cost you. Like all the actively managed ARK Invest funds -- except the ARK Next Generation ETF (ARKW -0.69%), which has a 0.87% expense ratio -- the ARK Space Exploration & Innovation ETF has a 0.75% expense ratio. So, on a $10,000 investment, for example, you'll pay $75 annually in fees.

Whether you're considering an ETF or a mutual fund (or another investment vehicle), it's always important to be mindful of the fees you may be charged. Investors want to maximize the returns on their investments, and investments with high expense ratios can cut into some of the profits you may generate from your investments.

Historical record

Historical performance of ARK Space Exploration & Innovation ETF

Unlike some ETFs that seek to match the performance of a certain index -- one tied to a sector or otherwise -- the ARK Space Exploration & Innovation ETF states that it has the broad goal of "long-term growth of capital." To assess the degree to which the ETF has met this goal, we can use the S&P 500 as a yardstick.

It's important to remember, though, that the ARK Space Exploration & Innovation ETF only launched in March 2021, so there isn't a lengthy history to consider.

Related investing topics

The bottom line on ARK Space Exploration & Innovation ETF

Although several aerospace ETFs provide exposure to stocks associated with the wild blue yonder, the ARK Space Exploration & Innovation ETF is the only one exclusively focused on companies that operate above the clouds. While the ETF's performance has provided much to celebrate, the prospect of a booming space economy in the coming years certainly makes it something for patient growth investors to give careful consideration.

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