4 ETFs for Smart Exposure to Intuitive Machines and the New Space Economy

The space economy is booming, and Intuitive Machines (NASDAQ:LUNR) is at the forefront of this exciting frontier. With its robust lunar payload services and NASA contracts, LUNR is a prime stock in the growing space exploration and aerospace and defense sectors. However, investing in LUNR comes with its own set of risks, particularly due to its high Beta of 1.31, indicating significant volatility. For investors seeking exposure to the space economy without the high risk, Exchange-Traded Funds (ETFs) offer a smart and diversified approach. Here are four ETFs that provide smart exposure to Intuitive Machines and the broader space economy.

Procure Space ETF (UFO)

The Procure Space ETF (NASDAQ:UFO) tracks the S-Network Space Index and includes space-related companies such as Intuitive Machines. With an expense ratio of 0.94%, UFO provides diversified exposure to the space sector, helping to mitigate the volatility of individual stocks like LUNR. This ETF is ideal for investors specifically interested in the space sector and willing to pay a slightly higher fee for targeted exposure.

ARK Space Exploration & Innovation ETF (ARKX)

The ARK Space Exploration & Innovation ETF (BATS:ARKX) actively invests in companies pioneering space exploration and innovation, such as Iridium Satellite (NASDAQ:IRDM) and Rocket Lab Usa Inc (NASDAQ:RKLB). Although it does not include LUNR in its holdings, ARKX offers a broader exposure to the space sector with an expense ratio of 0.75%. This ETF is suitable for investors looking for a diversified portfolio of innovative space companies.

iShares U.S. Aerospace & Defense ETF (ITA)

The iShares U.S. Aerospace & Defense ETF (BATS:ITA) follows the Dow Jones U.S. Aerospace & Defense Index and has an expense ratio of 0.4%. ITA's portfolio is heavily weighted toward well-known aerospace and defense companies like GE Aerospace (NYSE:GE), RTX Corp. (NYSE:RTX), and Lockheed Martin Corp. (NYSE:LMT). More than 40% of the fund’s total assets are held by its top three holdings, providing a defensive allocation that has performed well during market turbulence. This ETF is a cost-effective option for investors seeking stable exposure to the aerospace and defense sector.

SPDR S&P Aerospace & Defense ETF (XAR)

The SPDR S&P Aerospace & Defense ETF (NYSE:XAR) follows the S&P Aerospace & Defense Select Industry Index and has an expense ratio of 0.35%. XAR has the lowest expense ratio among the four ETFs, making it the most cost-effective option. Since LUNR has been growing its aerospace and defense contract business, there is a possibility of XAR including LUNR in its portfolio in one of its coming reallocations. This ETF provides a diversified exposure to the aerospace and defense sector, which can help mitigate the volatility of individual stocks.

In summary, investors can mitigate the volatility associated with investing in LUNR by using ETFs that offer diversified exposure to the space economy and the aerospace and defense sector. The potential trade-offs in terms of risk and return include a lower expected return compared to investing in a single volatile stock like LUNR, but with reduced risk due to diversification. ETFs like UFO, ARKX, ITA, and XAR provide different levels of diversification and risk management, allowing investors to choose the option that best fits their risk tolerance and investment goals. As the space economy continues to grow, these ETFs offer a smart way to gain exposure to this exciting and dynamic sector.