Best Defense ETFs

Every defense ETF is built around the same short list of US prime contractors. The primes are Lockheed Martin (LMT), the maker of the F-35; RTX (formerly Raytheon), which builds missiles and jet engines; Northrop Grumman (NOC), known for stealth aircraft and missile defense; General Dynamics (GD), which builds submarines and combat vehicles; and Boeing (BA), which spans commercial jets and defense systems. These five do most of the heavy lifting in a cap-weighted fund.

Below the primes sits a deep bench of suppliers and defense-tech names: L3Harris in communications and electronics, Leidos in defense IT, Howmet in aerospace components, Axon in tactical hardware, and others. How much these mid-cap names matter to a fund depends entirely on its weighting method, which is the one decision that separates ITA, PPA, and XAR. The drivers behind all of them are the same: national defense budgets, geopolitical tension, and the multi-year contract awards that fill the primes' order books.

ITA (iShares US Aerospace & Defense) is the largest and most widely held fund in the category. It holds roughly 35 US aerospace and defense companies, cap-weighted, which means the biggest contractors take the biggest slices. RTX, Boeing, and Lockheed Martin together make up a large share of the fund, so ITA is effectively a concentrated bet on the major primes rather than the broad supplier base. It also carries a relatively low expense ratio (around 0.40%) for a sector fund.

That concentration is the point and the risk. ITA gives you clean exposure to the companies with the largest defense backlogs, but it also means a few names drive most of the fund's movement. If you want the purest, cheapest read on the big US primes, ITA is the standard choice; if you want the smaller suppliers to matter more, the other two funds spread the weight differently.

PPA (Invesco Aerospace & Defense) casts the widest net of the three. It holds roughly 60 names, also cap-weighted, and reaches beyond the core primes into adjacent aerospace and defense-tech companies. That broader basket includes suppliers, electronics makers, and tech-adjacent names that the narrower ITA leaves out or weights lightly, so PPA reads as the most complete picture of the sector in one ticker.

The tradeoff is cost. PPA charges around 0.58%, the highest fee of the three main funds, in exchange for that breadth. Because it is still cap-weighted, the largest contractors remain its biggest holdings, but the longer tail of names gives it a different character from ITA. If you want sector breadth and are comfortable paying a bit more for it, PPA is the broadest of the group.

XAR (SPDR S&P Aerospace & Defense) takes a different approach: it equal-weights its roughly 35-40 holdings, so every company gets about the same slice regardless of size. That single design choice changes the fund's personality. The big primes no longer dominate, and mid-cap suppliers and defense-tech names carry as much weight as Lockheed Martin or RTX.

Equal weighting makes XAR more sensitive to the smaller, faster-moving parts of the sector, which tends to make it more volatile than cap-weighted ITA or PPA. In stretches when smaller defense names outrun the giants, XAR can pull ahead; when the primes lead, it can lag. It carries a sector-typical expense ratio (around 0.40%). XAR is the choice when you want even exposure across the sector rather than a primes-heavy fund.

The three main funds (ITA, PPA, XAR) are US-listed and US-focused, but defense spending is rising worldwide, especially across Europe and NATO. A newer wave of funds targets that. EUAD focuses on European and allied defense contractors, names like the large European primes that the US funds do not hold, riding higher EU defense budgets. SHLD is a global defense fund that spans US and international contractors in a single ticker.

These global funds matter because the big US-listed primes are not the only contractors benefiting from rising military budgets. European and allied manufacturers sit outside ITA, PPA, and XAR, so a global fund gives exposure to that part of the story. They are newer and smaller than the established US funds, so holdings and structure are still settling; confirm what each one actually holds on the issuer's site before deciding.

Defense ETFs concentrate on a single industry driven by a small set of companies, which makes them satellites rather than the foundation of a portfolio. A broad-market core like VOO or VTI already holds the big defense primes as part of the industrials sector; a dedicated defense fund layers extra weight on top of that to express a specific view. The returns hinge on defense budgets, geopolitics, and contract awards, so the fund swings harder than the broad market in both directions.

That is why most investors who hold defense size it small around a diversified core rather than as a large standalone position. The sector can outperform sharply when military spending and geopolitical risk rise, and lag just as sharply when budgets tighten. Treating ITA, PPA, or XAR as a concentrated tilt, not a replacement for a broad fund, is the way the category is most commonly used.

Figures are approximate as of early 2026; holdings counts, weighting, and fees change, so verify the current details on each issuer's site. The clearest split is ITA and PPA leaning on the big primes through cap weighting, XAR spreading weight evenly across the sector, and EUAD and SHLD reaching beyond the US-listed contractors.

Picking among ITA, PPA, and XAR is the easy part once you understand the weighting difference. The harder question is how a defense fund fits what you already own: how much it overlaps with the primes already in your broad core, how concentrated it would make your industrials exposure, and how it has done against the S&P 500. That is the part an AI assistant can actually help with, because it can reason over your real holdings rather than a generic list.

That is where Walnut fits. It connects your existing brokerage through SnapTrade and lets you ask, in plain language through Claude, ChatGPT, or a built-in assistant, how much a defense ETF overlaps with what you already hold, how big a slice it would become, and how each position is doing against the market. It is read-only by default, and you approve any trade. Walnut is not an investment adviser; it helps you see and act on your own portfolio rather than telling you what to buy.

Aerospace and defense investing in a single fund comes down to three US ETFs that hold the same companies and weight them differently. ITA is the cap-weighted, primes-heavy, lower-cost standard; PPA is the broadest at roughly 60 names for a higher fee; XAR is equal-weighted, giving mid-cap suppliers and defense-tech as much say as the giants. Newer global funds like EUAD and SHLD reach into European and international defense. All of them are concentrated sector satellites built on a handful of contractors, driven by budgets and geopolitics, and most commonly held as a small tilt around a broad core rather than as a foundation.

From a connected account you can dig into any of these as an ETF, look at an individual stock one of them holds, or explore a theme you want exposure to. For the wider map, see our best ETF in every category guide, the best ETFs to invest in for 2026, and the best AI ETFs. Holdings, weights, and fees change over time; treat the specifics here as a starting point and confirm on each provider's site before deciding.