For the foreseeable future, there will be demand for defense companies and the products they make. Defense stocks tend not to be as glamorous as high-growth sectors, such as tech. However, they provide reliable revenue and income from a customer -- the U.S. government -- with a seemingly insatiable appetite for their products.
Defense stocks tend to be stable contributors to an income-focused portfolio. Their predictable long-term revenue streams translate into solid dividends and healthy returns for investors. Defense ETFs are a type of investment that holds a basket of defense stocks, allowing investors to gain exposure to multiple stocks in the sector instead of having to choose between the various companies.
Since no single defense contractor makes everything, an investor would have to buy shares in all the largest defense companies to gain full exposure to the sector. With that in mind, it might make more sense to invest in defense through an exchange-traded fund (ETF) that gives you a small interest in a large number of companies with ties to the aerospace and defense market.
Six best defense ETFs to consider in 2025
Here are some of the top defense-focused ETFs:
1. iShares U.S. Aerospace & Defense ETF
The iShares U.S. Aerospace & Defense ETF (ITA +0.27%) is the largest ETF focused on defense, with $12.4 billion in net assets as of November 2025. 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 November 2025, the top five holdings in the iShares U.S. Aerospace & Defense ETF were:
- GE Aerospace (GE +0.21%)
- RTX (RTX +0.48%)
- Boeing (BA +0.77%)
- Howmet Aerospace (HWM +1.03%)
- General Dynamics (GD +0.33%)
The top five holdings represent just over 53% of the total assets in the portfolio, which included 39 stocks in late 2025. The iShares U.S. Aerospace & Defense ETF has a 38% expense ratio.
2. Invesco Aerospace & Defense ETF
The Invesco Aerospace & Defense ETF (PPA +0.22%) 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 $6.8 billion in assets in November 2025.
NYSEMKT: PPA
Key Data Points
As of November 2025, the top five holdings in the Invesco Aerospace & Defense ETF were:
- RTX
- GE Aerospace
- Boeing
- Lockheed Martin (LMT +1.18%)
- Northrop Grumman (NOC +0.59%)
The ETF had 60 total holdings in late 2025, with the top five representing about 35% 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 -0.11%) has $4.7 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 November 2025, the top five holdings in the SPDR S&P Aerospace & Defense ETF were:
- AeroVironment (AVAV -0.26%)
- Kratos Defense & Security Solutions (KTOS -3.01%)
- ATI (ATI +0.78%)
- Carpenter Technology (CRS +0.34%)
- Rocket Lab (RKLB +0.40%)
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 45 holdings.
4. ARK Space Exploration & Innovation ETF
ARK Space Exploration & Innovation ETF (ARKX -0.50%) 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 $447 million in assets under management. As of November 2025, the top five holdings in the ARK Space Exploration & Innovation ETF were:
- Kratos Defense & Security
- AeroVironment
- Rocket Lab
- Teradyne (TER -0.30%)
- L3Harris Technologies (LHX +0.19%)
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 +0.75%) 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.
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 $375 million in net assets. As of November 2025, 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 late 2025. 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 -0.50%) 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
How wars and global conflicts affect defense stocks and ETFs
A new conflict puts the spotlight on defense companies and usually has a positive impact on defense stocks and 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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