Defense spending is likely to remain elevated for years, driven by ongoing geopolitical tensions and sustained investment by the U.S. government and its allies. While defense companies rarely grab headlines like high-growth tech stocks, they tend to generate steady revenue from long-term government contracts and can provide reliable income for investors.
Defense ETFs offer a simple way to invest in this stability. Instead of choosing individual defense stocks, these funds hold a diversified basket of aerospace and defense companies, spreading risk across multiple businesses and programs. That matters in an industry where no single company does everything, and where contract wins and delays can affect individual stocks.
For investors who want exposure to defense spending without betting on any one contractor, defense ETFs can provide diversification, income potential, and long-term resilience. Here are some of the best defense ETFs to consider and how to invest in the sector.
Six top defense ETFs to consider
Here are some of the top defense-focused ETFs:
1. iShares U.S. Aerospace & Defense ETF
The iShares U.S. Aerospace & Defense ETF (ITA +1.44%) is the largest ETF focused on defense, with $14.3 billion in net assets as of January 2026. The ETF is designed to provide exposure to domestic United States aerospace and defense companies, as well as the commercial aerospace industry.
NYSEMKT: ITA
Key Data Points
As of January 2026, the top five holdings in the iShares U.S. Aerospace & Defense ETF were:
- GE Aerospace (GE +0.40%)
- RTX (RTX +1.36%)
- Boeing (BA +0.06%)
- L3Harris Technologies (LHX +3.33%)
- Lockheed Martin (LMT -1.12%)
The top five holdings represent just over 53% of the total assets in the portfolio, which includes 42 stocks. The iShares U.S. Aerospace & Defense ETF has a 0.38% expense ratio.
2. Invesco Aerospace & Defense ETF
The Invesco Aerospace & Defense ETF (PPA +1.46%) is based on the SPADE Defense Index, which is designed to identify companies involved in the development, manufacturing, operations, and support of the U.S. defense, homeland security, and aerospace sectors. The ETF had about $7.6 billion in assets in January 2026.
NYSEMKT: PPA
Key Data Points
As of January 2026, the top five holdings in the Invesco Aerospace & Defense ETF were:
- Boeing
- GE Aerospace
- RTX
- Lockheed Martin
- Northrop Grumman (NOC +2.91%)
The ETF had 61 total holdings, with the top five representing about 39% of the total portfolio. The Invesco Aerospace & Defense ETF has an expense ratio of 0.58%.
3. SPDR S&P Aerospace & Defense ETF
SPDR S&P Aerospace & Defense ETF (XAR +3.03%) has $5.6 billion in assets under management and invests in the stocks that comprise the S&P Aerospace & Defense Select Industry Index. The index attempts to broaden exposure past the so-called prime contractors that dominate the top end of the defense market, incorporating a mix of mid-cap and small-cap industry exposure.
NYSEMKT: XAR
Key Data Points
As of January 2026, the top five holdings in the SPDR S&P Aerospace & Defense ETF were:
- Karman Holdings (KRMN +8.60%)
- AeroVironment (AVAV +5.63%)
- Kratos Defense & Security Solutions (KTOS +7.50%)
- Rocket Lab (RKLB +9.51%)
- Huntington Ingalls Industries (HII +2.10%)
The top five holdings represented about 21% of the portfolio's total assets. The SPDR Aerospace & Defense ETF has a 0.35% expense ratio and 39 holdings.
4. ARK Space Exploration & Innovation ETF
ARK Space Exploration & Innovation ETF (ARKX +3.73%) is an aerospace-focused, actively managed fund run by Cathie Wood's Ark Invest. As with most of Ark's portfolio, this ETF is primarily focused on growth.
NYSEMKT: ARKX
Key Data Points
In this case, that means the ARK Space Exploration ETF has a lot of its assets invested in space-focused companies, as well as enabling technologies companies and other companies that support aerospace missions. The fund has about $508 million in assets under management. As of January 2026, the top five holdings in the ARK Space Exploration & Innovation ETF were:
- Kratos Defense & Security
- Rocket Lab
- AeroVironment
- L3Harris Technologies
- Teradyne (TER +13.35%)
The top five holdings represented about 42% of the total portfolio. ARK Space Exploration & Innovation ETF has a 0.75% expense ratio.
5. Direxion Daily Aerospace & Defense Bull 3X Shares
Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN +4.40%) is intended to generate a 300% daily return compared to its benchmark, the Dow Jones U.S. Select Aerospace & Defense Index. The fund does that by using leverage. Investors should be aware that, along with the potential for added reward, leveraged ETFs carry significantly more risks than standard ETFs.
NYSEMKT: DFEN
Key Data Points
Direxion states on its website that its leveraged ETFs are best for "aggressive" investors with a "willingness to accept substantial losses in short periods of time." The fund has about $342 million in net assets. As of January 2026, the top five holdings of the Direxion Daily Aerospace & Defense Bull 3X Shares ETF were:
- GE Aerospace
- RTX
- Boeing
- L3Harris
- Lockheed Martin
Those five holdings made up 54% of the portfolio in early 2026. The Direxion Daily Aerospace & Defense Bull 3X has an expense ratio of 0.95%.
6. SPDR S&P Kensho Future Security ETF
SPDR S&P Kensho Future Security ETF (FITE +0.11%) tracks the S&P Kensho Future Security Index, a modernized version of a defense index. The Kensho index is designed to track companies focused on issues such as cybersecurity, advanced border security, military robotics, drones, and space technology. This is a relatively new fund and index.
NYSEMKT: FITE
Key Data Points
The fund has about $108 million in assets. As of January 2026, the top five holdings in the SPDR S&P Kensho Future Security ETF were:
The fund reports that about 34% of its assets were invested in aerospace and defense companies, with 23% in systems software companies, 7% in communications equipment makers, and 6% in research and consulting. The SPDR S&P Kensho Future Security ETF has an expense ratio of 0.45%.
Why invest in defense ETFs?
There is solid, sustainable demand for both commercial and defense equipment, and top companies should be able to provide a steady stream of income and growth for long-term-focused investors. But deciding between individual companies is difficult. And with both commercial aerospace and defense companies primarily serving a small number of customers, the stocks tend to move in unison based on demand.
Investing in defense ETFs allows you to gain exposure to those long-term growth trends without having to pick winners and losers among individual companies.
How to choose defense ETFs
All these ETFs are broadly in the same category, but they contain different holdings driven by different themes. Investors should look for ETFs that cater to their specific interests, considering factors such as whether:
- The ETF is more focused on commercial or defense holdings.
- The ETF focuses on parts suppliers or prime manufacturers.
- The ETF is looking for growth, income, or a mix of the two.
- The ETF is focused on higher risk, higher reward disruptors or traditional manufacturers.
- The ETF is focused on companies doing business in the U.S., elsewhere, or both.
Investors can find the answers to these questions by visiting each ETF's website, where they will find a list of holdings and a paragraph discussing investment themes and goals. You should also pay close attention to fees. ETF fees can vary from fund to fund and from company to company, and higher fees will make it harder for an ETF to beat the market.
Investment strategies for defense ETFs
Investing in defense ETFs requires a blend of geopolitical awareness, technical fund analysis, and an understanding of the long-term rearmament cycle. Unlike broad market indexes, defense ETFs are heavily influenced by government budget cycles and sovereign security needs.
Generally speaking, the worst time to buy defense stocks and ETFs is when conflicts are in the news and the shares are spiking. This is a long-cycle business where any uptick in demand is unlikely to show up in next quarter's earnings, meaning periods of enthusiasm for the stocks are usually short-lived, and the prices revert to their long-term trends.
Are defense ETFs right for you?
When markets get volatile, it's nice to have a little diversification in your portfolio. Defense ETFs, like ETFs focused on the broader industrials sector, are unlikely to generate market-beating returns day in and day out. However, they do provide a basket of companies that tend to perform well in challenging times and offer a steady stream of income throughout the cycle.
The world can be a dangerous place. Investors may sleep better knowing that their portfolios contain companies designed to keep them safe when times get tough.
How wars and global conflicts affect defense ETFs
A new conflict puts the spotlight on defense companies and usually has a positive impact on defense ETFs. The logic makes sense: The equipment used in war is expensive, and if nations are depleting their reserves, it should mean greater demand for new products and services over time.
One word of caution, though: The large defense companies tend to earn higher margins on the research and development (R&D) of new platforms, and just restocking arsenals tends to be lower-margin work. And new orders can take quarters, if not years, to translate into revenue. For that reason, the pop that comes with a new conflict tends to fade.
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FAQ
Defense ETFs FAQ
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