Although the aerospace industry suffered during 2020 because of the Covid-19 pandemic, some airline ETFs actually took off in February 2021 when the US government sent fiscal help. Since the market expects airline ETFs to continue rising as vaccines are rolled out, we have produced this guide to the best airline ETFs to buy.
Where Can I Trade Airline ETFs?
Since ETFs (including airline ETFs) are traded like individual stocks, you can buy and sell them via the same stockbroker you would use for purchasing shares of company stocks. Some CFD and other leveraged brokers also let you place bets on whether the price of your chosen ETF will rise or fall. In all cases, it is important that you choose a regulated broker.
We have selected some of the best brokers for you to consider.
What is an Airline ETF?
Exchange-traded funds (ETFs) are like mutual funds but with the added advantage that they can be bought and sold on an exchange during the trading day just like regular airline stocks. An airline ETF invests in companies in the airline industry, including companies that specialize in logistics, passengers, aircraft manufacturers and airport services.
Some aspects of the airline industry depend on people’s spending power, so fluctuations go hand in hand with economic cycles. The value of airline ETFs should fall during a recession and rise when economic growth resumes.
Invest in Airline ETFs in 3 Steps
Open a Trading Account
It is necessary to find a broker that fits your needs and then sign up for an account with that broker by filling out its online application form. As well as entering your personal details, you may be asked to provide identification documentation and click a verification link sent to your email address or mobile phone.
Choose Airline ETFs
Based on our list of suggestions, or as a result of your own research, you can search your broker’s list of available ETFs to find the airline ETF(s) you wish to buy. You should be able to search and filter the list, and many brokers let you click each ETF in the list to see additional information.
Place Your Trade
After funding your account, you can then click the “buy” button for the ETF you wish to buy. Since ETFs are traded like individual stocks, you can place a limit order to buy at your preferred price (or not at all) rather than buying at the current market price.
Best Airline ETFs to Buy Now
We have shortlisted our top 5 airline ETFs to buy this year. These ETFs have performed well since their inception dates and they have a strong team behind them.
- U.S. Global Jets ETF (JETS)
- SPDR S&P Transportation ETF (XTM)
- iShares Transportation Average ETF (IYT)
- ETFMG Travel Tech ETF (AWAY)
- Direxion Daily Transportation Bull 3X Shares (TPOR)
1. U.S. Global Jets ETF (JETS)
Created in 2015, this airline ETF tracks US (67.69%) and non-US airlines. Its leading sector is domestic passenger airlines (74.46%) followed by airport services and air freight courier services. The expense ratio is 0.60% and the average spread is 0.05%. After the March 2020 low point caused by the coronavirus pandemic, this ETF had recovered about three-quarters of its value by June 2021 but could rise higher.
2. SPDR S&P Transportation ETF (XTN)
XTN was founded in 2011 to follow only United States transportation industry stocks. In 2020, this ETF had an annual total return of 11.81%. It has a total of 42 holdings, of which 44.69% are ground freight and logistics. Passenger airlines are its second top sector, representing 24.66%. This ETF has an expense ratio is 0.35%. XTN shares had recovered twice the losses sustained in February/March 2020 by June 2021.
3. iShares Transportation Average ETF (IYT)
IYT has been tracking US airline companies since 2003. In 2020, its annual total return was 14.24%. It has 20 holdings where its top two sectors are ground freight and logistics (57.25%) and air freight and courier services (25.42%). The expense ratio is 0.44% and the share price has been in a sustained uptrend between March 2020 and June 2021.
4. AWAY - ETFMG Travel Tech ETF (AWAY)
With an inception date of February of 2020, AWAY is one of the newest airline ETFs. It tracks the Prime Travel Technology Index, the constituent companies of which are dedicated to travel and tourism. It has 27 holdings, and its expense ratio is 0.75%. The share price has been volatile from inception until June 2021 but with no clear uptrend or downtrend.
5. Direxion Daily Transportation Bull 3X Shares (TPOR)
This airline ETF has been available since May 2017. Its expense ratio is 1.01% and its average spread is 0.33%. As advertised, TPOR “provides 3x leveraged exposure to a price-weighted index of large US transportation companies selected by a committee” but buyers should be aware that the advertised multiplier — in this case, 3x — is always misleading for leveraged ETFs if you hold them for longer than a day. Nevertheless, in May 2021 this ETF’s share price was almost double the price that stood before the February/March 2020 market crash.
Expert Tip on Investing in Airline ETFs“ To trade airline ETFs or any assets successfully, it is important to keep your emotions under control. One way to do this is to use pending orders that will automatically buy the ETF if it falls to the price you want (limit order) and sell it automatically if the price then falls further than the maximum loss you’re willing to suffer (stop order). Automated orders take the emotion out of trading, and this is only possible because ETFs are traded more like stocks than mutual funds. ”- Mauricio Carillo
Why Trade ETFs?
ETFs are less risky than individual stocks because they represent baskets of different stocks, so there is some diversification built in. ETFs are easier to trade than traditional mutual funds, and you can automate some aspects of your trading. Airline ETFs give global investors exposure to the airline industry that could take off again in the post-pandemic world.
Frequently Asked Questions
We have identified five of the top airline ETFs in this guide. Although ETFs are inherently diversified, you can benefit from additional diversification by buying more than one of them.
It depends on the ETF you choose. One of the ones we identified hasn’t fully recovered from the coronavirus pandemic, so (depending on how you look at it) it could be an underperformer or a “better value” ETF that is yet to realise its value.
ETFs appeal to investors who want diversified exposure to a particular index or industry sector (such as airlines) and who want to be able to buy and sell a mutual-like fund in the same way they would buy and sell an individual stock.
Shares are a unit of stock. An ETF represents a basket of stocks that can be bought and sold as a whole as though a single stock.
ETFs in general are good investments for beginners because of the diversification across several stocks.
ETFs that promise 3x the returns of an underlying index typically don’t do so. When such ETFs are held for longer than a day, compounding means that the actual return is different from the advertised return.