What is the main difference between active and index-based ETFs?

Active ETFs, such as ARKX, employ portfolio managers to select holdings, aiming to outperform the market through specific investment themes like space innovation. Index-based ETFs, like XAR, passively track a predefined benchmark to replicate its performance. Active management typically involves higher fees to cover research costs and offers potential flexibility, while index tracking provides broader market exposure and generally lower expenses. The choice often depends on whether an investor prefers a manager's strategy or the market's overall return.

What does an expense ratio represent?

The expense ratio is the annual fee charged by an ETF to manage its assets, deducted directly from the fund's value. It is expressed as a percentage of your investment. For instance, a 0.75% expense ratio means £75 is charged annually on every £10,000 invested, whereas 0.35% costs £35. Lower ratios generally result in higher net returns over time, assuming similar performance. These fees cover administration, management and operational costs, so understanding this difference helps in assessing the fund's cost efficiency relative to its peer group.

How do net assets impact ETF trading?

Net assets represent the total market value of the fund's holdings. Larger assets, such as XAR's $6.1 billion compared to ARKX's $762 million, generally imply better liquidity. This means traders can buy or sell shares more easily without significantly affecting the price. Higher liquidity often leads to tighter bid-ask spreads, reducing hidden transaction costs for investors. While smaller funds are not necessarily riskier in terms of structure, they may exhibit wider price gaps and less frequent trading volume, which can be relevant for active traders or those with large positions.

How do the top holdings compare between ARKX and XAR?

There is limited overlap in the top ten holdings of these funds. Both include Kratos Defence (KTOS), Rocket Lab (RKLB) and AeroVironment (AVAV). However, ARKX lists SpaceX (SPCX) as its largest position at 10.59%, followed by L3Harris (LHX) at 6.25%, with a strong tilt toward technology and space firms like AMD and NVDA. XAR holds a more balanced aerospace and defence mix, with AeroVironment at 3.21% and other major players like Northrop Grumman and Lockheed Martin, reflecting its index-based structure.

How do the dividend yields of ARKX and XAR compare?

ARKX currently reports a dividend yield of 0.00%, meaning it does not distribute regular income to shareholders at present. This is common for growth-focused active ETFs where reinvestment in capital appreciation is the primary goal. XAR offers a modest yield of 0.17%, providing some income from its constituent companies. For income-focused investors, this difference is significant. For others, the lack of yield in ARKX may indicate that all returns are expected through share price growth, though this does not guarantee future performance.

Which investing goals are typically associated with each fund?

ARKX is often associated with thematic growth investing, targeting companies involved in space exploration and defence innovation. It appeals to investors seeking high-growth potential in emerging sectors, accepting higher concentration risk and fees. XAR is linked to core sector exposure, offering a diversified view of the established aerospace and defence industry. It suits investors looking for balanced industry representation with lower costs. The choice reflects a preference for a specific thematic trend versus a broader, more traditional industrial sector benchmark.

What is the expense ratio difference between ARKX and XAR?

ARKX has an expense ratio of 0.75%, while XAR's is 0.35%. This represents a 0.40 percentage point difference in annual fees. Over long periods, even small percentage differences can compound, potentially affecting net returns. ARKX's higher cost reflects its active management strategy, where fund managers make discretionary decisions about holdings. XAR's lower fee is characteristic of passively managed ETFs. Investors often weigh the potential benefits of active stock selection against the certainty of lower costs in index funds when comparing these expenses.

What sectors do ARKX and XAR primarily focus on?

The underlying data does not provide specific sector weight percentages for these funds. ARKX is categorised under Technology, reflecting its focus on space and defence innovation, which often overlaps with advanced technology. XAR is categorised under Industrials, representing a traditional aerospace and defence sector focus. Without detailed sector breakdowns, investors should understand that ARKX likely holds a mix of tech and space entities, while XAR tracks a broader industrial defence index, offering different market exposures.

How does the inception date affect fund comparisons?

ARKX was launched in March 2021, while XAR has been operating since September 2011. The significant age difference means XAR has a longer performance history across various market cycles, potentially offering more data for risk assessment. ARKX is a younger fund, which can be a consideration for investors seeking to understand how a new strategy performs over different economic conditions. Longer track records generally provide more confidence in a fund's management process, while newer funds might be more flexible in adapting to recent market themes.

What factors should beginners consider when comparing ETF fees?

Beginners should look beyond the headline expense ratio. While ARKX charges 0.75% and XAR 0.35%, the higher fee for the active fund aims to justify itself through potential outperformance. However, fees are certain costs, whereas outperformance is uncertain. It is crucial to calculate the impact of fees over the intended holding period. Additionally, consider the fund's turnover and trading volume, as these affect the bid-ask spread. Lower liquidity can increase transaction costs, offsetting the advantage of a lower expense ratio.

How do holdings concentration and index tracking differ?

ARKX shows high concentration, with its top holding, SpaceX, at 10.59%, followed by several others above 5%. This means its performance relies heavily on the success of these few companies. In contrast, XAR has a flatter structure, with its top holding at just 3.21%, indicating broader diversification across the aerospace and defence industry. Index-based funds like XAR inherently diversify risk more than a concentrated active strategy, as they hold a wider range of companies in the benchmark, reducing the impact of any single stock's performance.

What information is missing from this ETF comparison?

The data explicitly states that the 'index tracked' is 'not available' for both ARKX and XAR, despite XAR being an S&P index product and ARKX being active. Additionally, 'sector weights' are also marked as 'not available' for both. This limits the ability to analyse precise industry allocations or benchmark deviations. Furthermore, while top holdings are listed, the total number of holdings and their distribution tail are unknown. These missing metrics are crucial for a comprehensive risk and performance assessment.

ARKX vs XAR

Two funds, one decision: we compare cost, performance and what each ETF actually holds in October 2026.

This page compares ARK Space & Defence Innovation ETF (ARKX) and S&P Aerospace Defense SPDR ETF (XAR) on fees, holdings, dividends and how each fund tracks its market. Expense ratios are 0.75% vs 0.35%, yields 0.00% vs 0.17%, and both show no dividend for ARKX. Educational content, not financial advice.

This page compares ARK Space & Defence Innovation ETF (ARKX) and S&P Aerospace Defense SPDR ETF (XAR) on fees, holdings, dividends and how each fund tracks its market. Expense ratios are 0.75% vs 0.35...

Fund Snapshot

Key Fund Metrics

ARKX

Metric

XAR

0.75%

Expense Ratio

0.35%

0.00%

Dividend Yield

0.17%

$761.70M

Net Assets

$6.10B

35

Holdings

52

Mar 30, 2021

Inception Date

Sep 28, 2011

–

Index Tracked

–

Technology

Fund Category

Industrials

XAR costs about $40.00 less per year for every $10,000 invested.

Shared Top Holdings

Holding	ARKX	XAR
KTOSKratos Defense & Security Solutions, Inc.	6.07%	2.97%
RKLBRocket Lab Corporation	5.51%	3.17%
AVAVAeroVironment, Inc.	5.06%	3.21%

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Investment Analysis

ARKX

Pros

ARKX provides active management seeking high growth in space and defence innovation sectors.
Top holdings include high-growth firms such as SpaceX, L3Harris, and Kratos Defence.
The fund captures emerging space economy trends alongside traditional defence technology companies.

Considerations

The expense ratio of 0.75 per cent is relatively high for an ETF.
Dividend yield is currently 0.00 per cent, offering no regular income to investors.
The fund is highly concentrated with the top ten holdings comprising a significant portion.

XAR

Pros

XAR tracks a broader aerospace and defence index with lower concentration in top holdings.
The 0.35 per cent expense ratio is more cost-efficient compared to active alternatives.
Net assets of 6.1 billion dollars support better liquidity and trading activity.

Considerations

Dividend yield is modest at 0.17 per cent, limiting income potential.
The fund may underperform during sector downturns due to its thematic focus.
Being index-based, it lacks the flexibility of active managers to avoid weak holdings.

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