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Space Exploration Set to Gain Momentum: 3 Fund Picks

The United States had emerged victorious in the space race when it landed the first man on the moon, way back in 1969. However, in the past 60 years, the industry has witnessed a sea change as large corporations in partnership with the national government have shown progress, be it satellite launches to handle 5G communications, fostering space tourism or building rocket components or sending supplies to the space station What was once imagined only in sci-fi movies is now widely feasible, courtesy of the millions of dollars invested every year in space transportation, exploration and more.

Following the initial competition to foray into space, technological hurdles had dampened man’s interest in leading an expedition to that mysterious zone. However, progress in propulsion technology, nanotechnology and AI restored the buzz of curiosity surrounding the space industry. Private aerospace companies like SpaceX creates a record by launching 26 space missions in 2020 as an endeavor to test flights for commercializing Earth’s lower orbital programs and delivering packages to the International Space Station (ISS). Virgin Galactic, a space tourism company, completed the first two successful glide flights with its SpaceShipTwo spacecraft.

Moreover, the industry has significant backing from the US government. President Joe Biden embraced two of Trump’s signature initiatives, namely the Artemis program, which is the National Aeronautics and Space Administration’s (NASA) effort to return astronauts to the Moon, and the sixth branch of the armed services, Space Force. The US space agency NASA aims to land the first woman on the Moon through its ambitious international spaceflight program Artemis by 2024. With the industry making a rapid progress, NASA sent astronauts to the ISS for the first time since 2011, which is a marked progress as this must have cost the country a fortune to send their astronauts to the ISS.

According to Morgan Stanley report, the global space industry could generate revenues in excess of $1.1 trillion in 2040, up from approximately $350 billion in 2018. Per a ResearchAndMarkets report, the industry is projected to witness a CAGR of 5.6% during the 2018-2026 forecast period.

Recently, the ARK Space Exploration & Innovation ETF (ARKX) that was launched on Mar 31 and encompasses a broad vision of space exploration companies, was able to rake in more than $500 million within a week. It is the most successful ETF launches ever and this pure-play space ETF holds great potential.

3 Top Choices

Demand for nano-satellites and re-usable launch vehicle systems continues to drive growth for the space industry. Given the current scenario, it continues to witness a boom as humans always love fantasizing about the realm beyond the Earth and look for grabbing a chance to participate in space tourism.

Here are three funds that flaunt a Zacks Mutual Fund Rank #1 (Strong Buy) and has significant exposure to space exploration and related companies. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify the potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on its past performance but also on its likely future success.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily the reason for parking money in the mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Defense & Aerospace Portfolio FSDAX fund invests a huge portion of its assets in the securities of companies, involved primarily in the research, manufacture, and the sale of products and services, per the defense or aerospace industries. It seeks capital growth by investing in both U.S. and non-U.S. companies.

This Sector - Other product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 4.7% and 12.7% over the past three and five-year benchmarks, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSDAX has an annual expense ratio of 0.75%, which is below the category average of 1.04%. Additionally, the fund has substantial investments in space companies like Northrop Grumman Corp, Teledyne Technologies, Lockheed Martin, Raytheon Technologies Corpand Boeing, et al.

Fidelity Select Industrials Portfolio FCYIX fund seeks capital appreciation. This non-diversified fund normally invests a large portion of its assets in the common stock of companies, principally engaged in the research, development, manufacturing, distribution, supply or sale of materials, equipment, products or services related to cyclical industries.

This Sector - Other product has a history of positive total returns for above 10 years. Specifically, the fund has three and five-year returns of 2.8% and 11.2%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FCYIX has an annual expense ratio of 0.76%, which is below the category average of 1.04%. Additionally, the fund has heavy investments in space companies like Rockwell Automation, Honeywell International, Teledyne Technologies and Boeing.

Fidelity Select Environment and Alternative Energy Portfolio FSLEX aims for capital appreciation. The non-diversified fund invests the majority of assets in common stocks of companies, chiefly engaged in business activities related to alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies or other environmental support services.

This Zacks Sector – Other product has a history of positive total returns for more than 10 years. Specifically, FSLEX has three and five-year returns of 10.9% and 16.4%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSLEX has an annual expense ratio of 0.85% compared with the category average of 1.04%. Additionally, the fund has significant investments in space companies like TE Connectivity, Tesla and Honeywell International.

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