If it is your moment to jump into the market, you might want to consider the best airline ETFs to buy. However, before investing it is crucial to understand how these funds and the specific industry works.
ETFs are like mutual funds with the only difference that they are bought and sold on an exchange like stocks. You can be active during market hours and use specific trading techniques such as overnight positions or leverage.
Although airlines suffered during 2020 because of the COVID-19 pandemic, during February 2021, airline ETFs soared as the US government sent fiscal help. The market expects these ETFs to continue rising at a steady pace as vaccines are being distributed around the world, and countries are working towards the new normal.
What is an airline ETF?
An airline ETF invests in companies in the airline industry including holdings that specialize in logistics, passengers, airport services, airline passenger companies, and other services related to this industry.
It is important to note that airline ETFs will depend on people’s resources. It means that the price fluctuations go hand in hand with the economy’s cycles.
If there is a recession these ETFs will be affected, while economic growth will benefit them. All of it makes it crucial to understand how the market works, and how you can react to it taking into account that ETFs are bought and sold like stocks during market hours.
Invest in airline ETFs in 3 steps
Open a trading account
Before opening a trading account, it is necessary to find a broker that fits your needs. When this step is behind you, you can sign up for a trading account by filling in the information the broker asks for. It will most likely be your email, phone number, password, and name. A verification code will be sent, so you can activate your account.
Choose airline ETFs
Once your trading account is up and running, your next step would be to deposit to your account balance. To do so, click on the deposit button and choose your method: credit card, debit card, e-payment, or bank wire transfer. The money will be credited according to the broker’s rules. It could be verified immediately or take a few business days.
Place your trade
Once your account is funded, you will be able to place your first trade. It is a good idea to already know how many ETFs you want to buy according to the types of ETFs that are offered by your broker. If you don’t know which one to buy, you might want to refer to their customer service.
Where can I trade airline ETFs?
Airline ETFs can be bought and sold through brokers, who act as intermediaries between you and the financial securities. They offer various assets with different fees and commissions. It is essential that your broker is regulated and accepts clients from your country. This will allow you to keep your funds safe.
Below we have shortlisted the best brokers in 2021 based on their costs, regulations, and excellent customer support. The education section is also key because it is a place you can refer to as a beginner or an advanced trader to check a fact or have your doubts answered.
Best airline ETFs to buy now
We have shortlisted our top 5 airline ETFs to buy during 2021. Since their inception date, these ETFs have had a distinguished performance with a strong team behind them. They also include important airline services and companies with a positive track record on the financial market.
- JETS U.S. Global Jets ETF
- XTM - SPDR S&P Transportation ETF
- iShares Transportation Average ETF (IYT)
- AWAY - ETFMG Travel Tech ETF
- TPOR - Direxion Daily Transportation Bull 3X Shares
JETS - U.S. Global Jets ETF
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. Its expense ratio is 0.60% with an average spread of 0.05%. Its daily average trading volume is $121.40 million, and it has $3.01 billion in assets under management.
XTN - SPDR S&P Transportation ETF
XTN was founded in 2011 and follows US-only stocks from the transportation industry. In 2020, it had an annual total return of 11.81%. It has a total of 42 holdings where 44.69% is ground freight and logistics. Passenger airlines is its second top sector representing 24.66%. This ETF has a weighted average market cap of $20.54 billion. Its expense ratio is 0.35% and its assets are valued at $488.10 million.
IYT - iShares Transportation Average ETF
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 average weighted market cap is $48.14 billion with a daily trading volume of $26.89 million. Furthermore, the expense ratio is 0.44%.
AWAY - ETFMG Travel Tech ETF
AWAY is one of the newest airline ETFs. Its inception date is February of 2020 and it tracks the Prime Travel Technology Index. The companies’ services are dedicated to travel and tourism. It has 27 holdings, and its expense ratio is 0.75%. Its managed assets are valued at $103.62 million and its average daily volume is $3.10 million.
TPOR - Direxion Daily Transportation Bull 3X Shares
This airline ETF has been in the market since May 2017. Its expense ratio is 1.01%. Its average spread is 0.33%, and it has $48.63 million assets under management. According to reports, TPOR “provides 3x leveraged exposure to a price weighted index of large US transportation companies selected by a committee.”
Expert tip on investing in airline ETFs
To trade airline ETFs successfully, it is important to keep your emotions under control since they can be overpowering in situations when you need to stay calm. With your emotions regulated, you can trade consistently. Your mental state will take you to success or failure along with your financial knowledge. As they say, knowledge is power. So, whether your plan is to invest or to trade, understanding market movements and how to react to them will help you get through rough patches with a good outcome. It is also important to compare ETFs from the same industry to see which one has had a better historical and yearly performance. You should stick to a balance of high assets and low cost. Take a look at their expense ratio and average spread.
Why trade ETFs?
ETFs have many benefits such as lower risk and a diversified portfolio. They can be traded on the market like stocks. Airline ETFs allow you to gain access to the airline industry. Although they follow the economic sentiment, they are well known for their ability to recover.
Trading airline ETFs is a good idea, and one of the reasons for it is direct exposure to the airline industry in different forms: ground freight, air freight, logistics, courier services, airport services, and more.
Frequently Asked Questions
It will depend on what you are looking for. Airlines work not only with passengers, so look for the airline service you think is best for you.
It depends on the ETF you choose: dedicated to ground freight, air freight, logistics, courier services, airport services, or others. Some of them are US-only or have more than one industry involved.
Anyone looking to trade or invest might want to buy or sell airline ETFs. It will depend on personal needs and goals.
Shares are a unit of stock. On the other hand, ETFs can hold stocks.
If you are a beginner, and you have studied enough to react to the fast-moving market, then it’s a good investment for you.
This will depend on the companies the ETF tracks. There could be many holdings involved or maybe just a few. Each of these will have a different size and percentage.