For the first time since the 1960s, people are heavily invested – figuratively and literally – in the “space race.” Space travel and technology are so popular right now that investors are taking notice. There are other segments of the space market, too, some you may have never considered before: analytics, exploration, imaging, minerals, tourism and water extraction. There’s also quite a bit of cash flow thanks to satellite communications – while one of the more mundane areas of the space market, it’s still a lucrative one.
New Investment Opportunities in Space
In the past, the government was heavily involved in building and providing the hardware and software required for space exploration. Today, the government is acting more like a customer and less like an involved party – while the government was always a customer, now it’s only a customer and not much more. This has opened the door for other companies and suppliers to make their way into the market. According to Seeking Alpha, “In short, this time around the New Space Race is a commercial affair, with a large number of suppliers operating by the profit motive.” You don’t have to be a venture capitalist to get in on this – many companies have tradable securities and IPOs.
Elon Musk and SpaceX
CNN states that Elon Musk’s SpaceX is now valued at over $30 billion. Here’s what investors should know about the current state of SpaceX:
- One of SpaceX’s projects is Starlink, a network of 12,000 low-orbit satellites that are meant to beam Internet to the whole planet.
- Alphabet (Google’s holding company) and Fidelity Investments invested $1 billion in Starlink for a 10% stake.
- Other companies have also been approved for low-orbit satellite constellations: OneWeb, Telesat Canada and Space Norway.
In addition to setting up a network of satellites, SpaceX has also redesigned space travel. Jon Markman, writing for Forbes, noted: “Its rocket boosters use a super-cooled liquid oxygen propellant that is denser than conventional rocket fuel. This gives the rocket boosters extra capacity. And it also allowed engineers to experiment with reuse.” SpaceX’s varied projects attract different types of investors – those who want to play it safe can rely on the satellites, while riskier investors will keep an eye on travel technology.
More Options for Investors
There are a number of ways for investors to profit from the space race, and they don’t have to be uber-wealthy to do it. For example, Boeing and Lockheed, large United States defense contractors, offer diversified investment opportunities, including some in the space market. Barron’s advises, “These are the simplest ways to dip a toe into space investing. Boeing trades at a slight premium to the market and Lockheed at a slight discount.”
According to the Satellite Industry Association, the global space business is worth nearly $350 billion, and satellite services and ground equipment make up over 70% of that. There are plenty of companies in the satellite business to consider investing in, and many of them don’t require risky investments. Ball, for example, makes aluminum cans but also has a satellite segment of their business that accounts for almost 10% of their revenue.
Investors who want to play it safe may invest in an established company that has committed just a portion of itself to the space market. If the space race becomes what it’s expected to be, the investment will pay off, and there will be even more opportunities for investing in the future. If these technologies flop or take longer than expected to deliver results, the investments may still be safe because a majority of the company is based in another industry.
Investing Your IRA in the Space Race
IRA stands for “Individual Retirement Account,” and it’s an account that holds several investments, including stocks, bonds and mutual funds. The point of an IRA is to save for retirement and to invest your money so that it accrues interest until you withdraw it. The earlier you invest, the more interest the IRA will accrue in its lifetime.
IRAs have a lot of investment options, and you can also choose how you want to allocate your funds, including foreign exchange. Most people want to balance out the risk of their investments. This means taking a lot of risk with stocks (which also yield the biggest returns) and then balancing that risk with reliable and fixed-income investments. For people who want to invest in the space race and see if the investments will pay off in the future, their IRA may be the perfect place to gamble a bit.
Space travel has always been an exciting notion, and to the layman, everything about it seems sci-fi even as space exploration becomes more and more normalized. While cutting-edge space technologies are high-risk for the investor, they may also pay off in a huge way if they do what they intend to. For the forward-thinking investor, space technology is an exciting and potentially rewarding investment.
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