Industrial exchange-traded funds (ETFs) are investment funds focused on holding shares of companies in the industrial sector. That industry is vital to the global economy. Companies in the sector manufacture and distribute building products and machinery, provide commercial and professional services, and offer transportation services. Given the vital role industrial companies play in supporting the global economy, many rely on the economy to drive growth. When the economy slows, it can affect industrial stocks.
However, that's not the case for all industrial stocks. The sector also includes companies that operate in the defense and aerospace industry, as well as those that provide waste management, which are relatively recession-proof. Investors shouldn't completely dismiss all industrial stocks when concerns about a recession arise.
The various factors affecting industrial stocks can make it difficult for investors to pick the right stocks that will benefit from the sector's driving forces. One potential solution is investing in an ETF focused on the industrial sector. Some ETFs offer investors broad exposure across the entire industrial sector, while others focus on one aspect, such as aerospace and defense. Here's a closer look at some of the top industrial ETFs.
Seven top industrial ETFs in 2026
There are more than a dozen ETFs focused on the industrial industry. Here are seven top industrial ETFs:
Industrial ETF | Ticker Symbol | Assets Under Management (AUM) | ETF Focus |
|---|---|---|---|
Industrial Select Sector SPDR Fund | $24.1 billion | Broad industrials | |
Vanguard Industrials ETF | $6.4 billion | Broad industrials | |
iShares U.S. Aerospace & Defense ETF | $6.9 billion | Aerospace and defense | |
U.S. Global Jets ETF | $772.2 million | Airlines | |
SPDR S&P Aerospace & Defense ETF | $4.8 billion | Aerospace and defense | |
Invesco Water Resources | $2.1 billion | Water | |
iShares U.S. Transportation ETF | $693.3 million | Transportation |
1. Industrial Select Sector SPDR Fund
NYSEMKT: XLI
Key Data Points
The Industrial Select Sector SPDR Fund is the behemoth among industrial ETFs, with $24.1 billion in assets under management (AUM)--about twice as much as the next largest industrial ETF. The ETF aims to track the performance of the industrial sector within the S&P 500 index. The fund held almost 80 stocks in late 2025. The ETF's top five industries within the industrial sector were:
- Aerospace and Defense: 27.1% of the fund's holdings
- Machinery: 19.2%
- Ground Transportation: 10.7%
- Electrical Equipment: 11.6%
- Professional Services: 6.2%
Given its focus on industrial stocks within the S&P 500, the ETF holds shares of the largest industrial companies in the country. Meanwhile, it allows investors to gain broad exposure to the top industrial stocks for an ultra-low ETF expense ratio of 0.08%. These factors make it an excellent ETF for those seeking a low-cost way to invest in the largest industrial stocks.
2. Vanguard Industrials ETF
NYSEMKT: VIS
Key Data Points
The Vanguard Industrials ETF offers even broader exposure to the industrials sector. In late 2025, the ETF held almost 390 industrial stocks. The fund's top five industries within the industrial sector were:
- Aerospace and Defense: 23.6% of the fund's holdings
- Machinery and Supplies: 9.3%
- Electrical Components and Equipment: 7.6%
- Construction Machinery and Heavy Transport: 6.6%
- Building Products: 6.3%
The ETF offers this broader sector exposure for a very low ETF expense ratio of 0.09%. These characteristics make the ETF an excellent option for investors seeking a low-cost way to broadly invest in the industrial sector.
3. iShares U.S. Aerospace & Defense ETF
NYSEMKT: ITA
Key Data Points
The iShares U.S. Aerospace & Defense ETF focuses on holding U.S. companies that manufacture commercial and military aircraft and other defense equipment. The ETF had almost 40 holdings in late 2025, led by the following five industrial stocks:
- GE Aerospace (GE -2.55%): 21.5% of the fund's holdings.
- RTX (RTX +2.45%): 15.6%
- Boeing (BA -0.82%): 7.3%
- Howmet Aerospace (HWM +0.28%): 4.7%
- General Dynamics (GD +0.74%): 4.5%.
The ETF offers broad exposure to the aerospace and defense industry, weighted toward the sector's largest players. It also charges a reasonable ETF expense ratio of 0.38%. The fund's features make it a solid option for investors looking to add exposure to the aerospace and defense industry to their portfolio.
4. U.S. Global Jets ETF
NYSEMKT: JETS
Key Data Points
The U.S. Global Jets ETF provides investors with access to the global airline sector. It holds airline stocks and aerospace manufacturers from around the world. The fund had around 50 holdings in late 2025, led by the following five:
- American Airlines (AAL -1.37%): 11.4% of the fund's holdings
- Southwest Airlines (LUV -1.50%): 11%
- Delta Air Lines (DAL -1.21%): 10.6%
- United Airlines (UAL -3.20%): 9.9%
- Air Canada (ACDVF +1.37%): 3.1%
The ETF enables people to invest in the entire airline industry. It has a modest ETF expense ratio of 0.6%.
5. SPDR S&P Aerospace & Defense ETF
NYSEMKT: XAR
Key Data Points
The SPDR S&P Aerospace & Defense ETF is another industrial ETF focused on the defense sector. However, it has a narrower focus on the S&P 500 index. It also takes a modified equal-weight approach that provides unconcentrated exposure to the sector. It had almost 40 holdings in late 2025, led by the following five:
- Aerovironment (AVAV +4.76%): 4.6%
- Kratos Defense & Security (KTOS +1.49%): 4.3%
- ATI (ATI -0.95%): 3.9%
- Carpenter Technology (CRS +0.89%): 3.9%
- Rocket Lab (RKLB +5.96%): 3.8%
The ETF charges a reasonable expense ratio of 0.35% to provide investors with broad exposure to defense stocks within the S&P 500. The fund's features make it ideal for investors who want less concentrated exposure across the entire defense sector.
6. Invesco Water Resources
NASDAQ: PHO
Key Data Points
The Invesco Water Resources ETF seeks to track the performance of companies that create products to conserve and purify water for homes, businesses, and industries. The water ETF had almost 40 holdings in late 2025, led by the following five:
- Waters (WAT -0.21%): 9.9% of the fund's holdings
- Ferguson Enterprises (FERG +1.23%): 8.6%
- Ecolab (ECL +0.77%): 7.6%
- Roper Technologies (ROP -0.51%): 6.9%
- American Water Works (AWK +0.91%): 5.9%
The ETF provides focused access to the water sector for a modest expense ratio of 0.59%.
7. iShares U.S. Transportation ETF
NYSEMKT: IYT
Key Data Points
The iShares U.S. Transportation ETF provides investors with exposure to U.S. airlines, railroads, and trucking companies. The ETF had almost 45 holdings in late 2025, led by the following five:
- Uber Technologies (UBER -0.89%): 22.1% of the fund's holdings
- Union Pacific (UNP -0.94%): 15.7%
- UPS (UPS +0.60%): 7.5%
- CSX (NYSE:CSX): 4.9%
- FedEx (FDX +1.26%): 4.9%
The fund offers investors the opportunity to invest in a basket of the country's largest transportation companies. It provides access with a relatively modest ETF expense ratio of 0.38%.
Benefits and risks of investing in industrial ETFs
Investing in industrial ETFs has advantages and disadvantages. Some of their benefits include:
- Diversified sector exposure: You can invest broadly in industrial stocks through ETFs.
- Targeted sub-sector investment: You can also target a specific industrial subsector, such as water or the airline industry, gaining broad exposure to those investment themes.
On the other hand, investing in industrial ETFs has some notable risks, including:
- Cyclicality: The industrial sector tends to be cyclical, which can make these ETFs more volatile than other sector funds.
- Underperformance potential: An industrial ETF can underperform the S&P 500 and the top industrial stocks.
Factors to consider before choosing industrial ETFs
Investors need to evaluate a few factors when choosing between industrial ETFs, including:
- Investment focus: Investors need to determine whether they want to invest in a broad sector ETF or one that targets a specific industrial sub-sector, such as defense stocks.
- Cost: You need to consider whether the fund's expense ratio is worth it.
- Income: Some industrial ETFs have higher dividend yields than others, providing investors with more passive income.
Related investing topics
Many ways to invest in industrial ETFs
Investors have many ways to use ETFs to invest in the industrial sector. They can own one that offers broad exposure to the entire industry or a more focused approach. Given the options, industrial ETFs can play an important role in an investor's portfolio.
For example, when the economy is in the early stages of recovering from a recession, they can invest in a broad-based industrial ETF or one focused on airlines or transportation stocks in hopes of profiting from the subsequent recovery. Meanwhile, they can take a more defensive approach by investing in an ETF focused on defense stocks that tend to be reasonably recession-resistant. They can also consider a water-focused ETF to invest in the thesis that the value of water-related investments will increase in the future.
Given the various roles industrial ETFs can play, they're an important tool for an investor to understand.
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