By Jonnelle Marte
The launch of the first private spacecraft bound for the international space station on Tuesday heralds a new era of space exploration, funded by the likes of movie director James Cameron and Microsoft co-founder Paul Allen.
But financial advisers point out that you don’t need to be a billionaire to invest in outer space. While private venture firms that back space travel are typically restricted to the super-wealthy, several exchange-traded funds invest in aerospace and defense companies – the same firms likely to be involved in creating the technology and equipment necessary to explore the final frontier. For example, both the $100 million iShares Dow Jones US Aerospace & Defense fund (ITA) and the $51 million Powershares Aerospace & Defense fund (PPA) list Boeing (BA) and Lockheed Martin (LMT), two aerospace companies responsible for much of the world’s rocket production, among their top holdings. These funds allow investors to get some exposure to industrial and aviation focused companies, while also spreading their bets across dozens of companies that contribute to the technology and equipment used for space travel. “For the average investor I would look at who’s providing the technology, who is providing the maintenance and the fuel,” says David Blain, a financial adviser based in New Bern, N.C.
Investing directly in space ventures is too risky for the average investor, Blain says. For one, the cost of space flight is so high that it’s likely years – if not decades – before such travel could be affordable to a large segment of the population. And individual stocks could plummet if there are setbacks or major disasters. Some of the companies that made the materials for the NASA space shuttle Challenger shuttle, which broke apart shortly after taking flight in 1986, struggled after the tragedy, says Rob Siegmann, chief operating officer for Financial Management Group in Cincinnati.
For investors who can’t resist getting in on the intergalactic action, however, experts recommend small investments in blue-chip companies that produce components that might be used in space travel. For instance, aviation companies like General Dynamics (GD) and tech provider Honeywell (HON), which make engines and aircraft, could benefit from growth in space travel, says Siegmann. “It’s too much risk to try to pick the one company that’s going to make it happen,” he says.