Best airline ETFs to buy in 2022
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The airline industry is crucial to global transport and investors are always on the lookout for new opportunities in this space. ETFs provide you the opportunity to simultaneously invest in various airline company stocks. This beginners guide has selected the best of the current market for you to place the right investment.
What are the top airline ETFs to buy?
Our analysts have selected five of the best airline ETFs for this year as displayed in the table below. Continue scrolling further to learn more about each in turn.
|#||ETF symbol||ETF name||Where to Trade|
|1||XTN||SPDR S&P Transportation ETF|
|2||IYT||iShares US Transportation ETF|
|3||JETS||US Global Jets ETF|
|4||OOTO||Direxion Travel & Vacation ETF|
|5||FTXR||First Trust NASDAQ Transportation ETF|
1. SPDR S&P Transportation ETF (NYSEARCA: XTN)
XTN is a fund that seeks to align with the yield and performance of the S&P Transportation Select Industry Index. Its 50 holdings feature companies in the transportation segment of the market. The fund provides niche exposure across large, mid, and small sized stocks, which makes it one of the best ETFs if you want exposure to the airline industry.
Although a small number of holdings means that long-term investors can take a more strategic and focused approach, there is also more scope for specific-holding risk when investing in XTN. You must do your own due diligence and fundamental analysis into holdings to best place your investment.
2. iShares US Transportation ETF (BATS: IYT)
IYT is a fund that corresponds with the investment results of an index composed of US equities in the transportation sector. The fund has 50 holdings in US companies within the airline, railroad, and trucking components of the transportation sector. As such, IYT provides an overview selection of the sector.
The performance of each segment is therefore key to fund performance. Investors must consider several factors that can adversely impact profitability, i.e. surging prices of fuel. You can minimise your risk by doing your own sector research before making an investment.
3. US Global Jets ETF (NYSEARCA: JETS)
JETS is a fund that seeks to replicate the US Global Jets Index. Its 51 holdings constitute some of the biggest names in the airline industry, i.e. Delta Airlines, United Airlines, American Airlines, Southwest Airlines, Alaska Air.
As the fund’s sole focus is on the airline industry, it does not hedge its risk of specific-industry performance against other industries. Investors must have faith in the recovery of the post-pandemic airline industry and invest with a long-term view of future growth.
4. Direxion Travel & Vacation ETF (NYSEARCA: OOTO)
OOTO is a fund that is based on The Bluestar Travel and Vacation Index. The fund has a stringent criteria for its 51 holdings across US travel and vacation company stocks. A criterion that is relevant to the airline industry is that the fund only holds companies that either derive 50% or more of their revenue from, or devote 50% or more of their annual budget to commercial airlines.
The travel and vacation industry is currently in recovery and investors interested in OOTO should remember that it features the industries that have plummeted the most as a result of the pandemic. There is opportunity to buy the dip but it requires a mindset that acknowledges that high reward comes at the cost of high risk.
5. First Trust NASDAQ Transportation ETF (NASDAQGM: FTXR)
FTXR is a fund that aims to reflect the performance of the NASDAQ US Smart Transportation Index. The fund’s small selection of 29 holdings are US companies in the transportation industry. Notable airline holdings include: Alaska Air, JetBlue Airways, Spirit Airlines, Delta Airlines, United Airlines.
Established names within the airline industry can reduce exposure to specific-holding risk in an ETF that only has such few holdings. Investors should consider the company fundamentals in doing their due diligence. This may provide an indication of profitability for the comeback of these reputed airline companies.
Where to buy the best airline ETFs
Registering with an online broker is the first step to buy ETFs. ETFs are like individual stocks, you can buy or sell them as is convenient. The table below features our preference of the best brokers that offer airline ETFs.
What is an airline ETF?
It’s an exchange traded fund that holds shares in companies that operate in the airline industry. Companies in this sector provide a range of air transportation and travel services for consumers and cargo. Notable companies in the industry include Southwest Airlines, Delta Airlines, and United Airlines.
The industry is making a slow comeback after the severe plunge caused by the peak of the pandemic. Vaccine rollouts and easing of global travel restrictions inspires renewed hope. Investors interested in this space have the opportunities to buy the dip by investing in airline ETFs.
Are airline ETFs a good investment?
Yes if you have the patience to hold out for a return in your investment. The airline industry is making a recovery after the pandemic hit it especially hard. If you are interested in buying the dip with airline ETFs, you must have a long-term outlook for speculative future growth.
Airline ETFs provide means to broadly invest into the industry, but are not all created equal. You must do your own due diligence into significant holdings within each ETF to determine the profitability of your investment. Key metrics for your own fundamental analysis should include: Available Seat Miles (ASM) and Revenue Per Available Seat Mile (RASM).
The good news is, people will always travel and there will always exist a need for mail and cargo to be delivered as quickly as possible. The International Air Transport Association expects approx. 7.8 billion passengers to travel by air in 2036 – nearly double the number from 2017. Airlines are going nowhere and you can use the links below to best place your investment in airline ETFs.
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