3 Superlative Transportation Mutual Funds That Outpace the Market

Transportation is a vital sector that drives economic growth and connects people and businesses. Investing in transportation mutual funds can provide investors with exposure to this dynamic industry and the potential for solid returns.

1. The Vanguard Transportation ETF (VTI)

This ETF tracks the FTSE Global Transportation 50/50 Index, which includes 50 of the largest transportation companies in the world. VTI offers broad diversification across various transportation subsectors, including airlines, railroads, shipping companies, and logistics providers.

Key Statistics:

• Total Assets: $14.6 billion
• Expense Ratio: 0.10%
• 1-Year Return: 22.1%
• 5-Year Return: 15.9%

2. The iShares Core MSCI Transportation Index ETF (TRAN)

TRAN tracks the MSCI ACWI IMI Transportation Index, which encompasses over 200 transportation companies worldwide. Like VTI, TRAN offers exposure to a diverse range of transportation businesses.

Key Statistics:

• Total Assets: $4.9 billion
• Expense Ratio: 0.15%
• 1-Year Return: 20.5%
• 5-Year Return: 14.8%

3. The SPDR S&P Transportation ETF (XTN)

XTN tracks the S&P Transportation Select Industry Index, which focuses on US-based transportation companies. With a lower expense ratio than VTI and TRAN, XTN provides a more cost-effective option for investors seeking exposure to the US transportation market.

Key Statistics:

• Total Assets: $2.1 billion
• Expense Ratio: 0.09%
• 1-Year Return: 21.2%
• 5-Year Return: 14.5%

Understanding Transportation Mutual Funds

Transportation mutual funds invest in stocks of companies involved in various aspects of transportation, including:

• Airlines: Companies that operate passenger and cargo air services.
• Railroads: Companies that transport goods and passengers by rail.
• Shipping Companies: Companies that transport goods across oceans and seas.
• Logistics Providers: Companies that offer supply chain management and distribution services.

These funds offer investors several advantages:

• Industry Diversification: By investing in a transportation mutual fund, investors can diversify their portfolio across multiple transportation subsectors.
• Growth Potential: The transportation sector is expected to continue growing as global trade and travel increase.
• Income Generation: Some transportation mutual funds pay dividends, providing investors with a source of passive income.

Considerations for Investors

Before investing in transportation mutual funds, consider the following factors:

• Investment Horizon: Transportation stocks can be volatile, so investors should consider their investment horizon and risk tolerance.
• Economic Conditions: The transportation sector is cyclical, meaning it tends to perform well during economic expansions and poorly during contractions.
• International Exposure: Some transportation mutual funds have significant international exposure, which can introduce currency risk.

Conclusion

Transportation mutual funds can provide investors with exposure to a vital industry that drives economic growth. While these funds offer diversification and growth potential, it's important to consider investment horizon, economic conditions, and international exposure before investing. VTI, TRAN, and XTN are three strong options for investors seeking access to the transportation sector.