Defense exchange-traded funds (ETFs) give you exposure to a basket of aerospace and defense companies in a single trade. Some track an index, and others are actively managed, which means a fund manager picks the holdings.(1)
Demand for the sector comes down to government budgets. World military spending reached about $2.887 trillion in 2025, the 11th straight annual increase, and European spending rose 14% to $864 billion.(2) In June 2025, NATO members agreed to a goal of 5% of GDP on defense by 2035, including at least 3.5% on core defense requirements.(3) Budgets don’t guarantee returns, though.
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We started with US-listed ETFs whose stated goal is exposure to aerospace and defense companies, then compared them using each fund issuer’s own fund page. To be considered, a fund had to meet four tests:
From the funds that passed, we picked one for each approach: a broad US index, an equal-weighted index, a defense technology index and an active fund. We don’t rank them against each other, and this isn’t a list of every defense ETF. Net assets and year-to-date returns are as of October 21, 2026, expense ratios come from each issuer’s fund page and one-year and three-year returns are as of September 30, 2026. Past performance doesn’t guarantee future results.
The iShares U.S. Aerospace & Defense ETF (ITA) tracks the Dow Jones U.S. Select Aerospace & Defense Index, which covers US aerospace and defense stocks, including makers of commercial and military aircraft.(4) It has 50 holdings, charges 0.37% a year and has about $11.9 billion in net assets, the most of any fund on this list. It launched in 2006, so it also has the longest track record here.(4)
Recent returns have been soft. ITA lost 0.80% over the year to September 30, 2026, and it’s down 3.90% so far this year, as of October 21, 2026. Over three years it returned 25.92% a year.(4) It pays a small dividend, with a 30-day SEC yield of 0.46% as of September 30.(4)
The tradeoff is focus. ITA holds only US companies, so it has no direct exposure to defense contractors based in Europe or Asia. iShares has also announced a forward stock split, and ITA shares will begin trading split-adjusted on November 5, 2026.(4)
The State Street SPDR S&P Aerospace & Defense ETF (XAR) tracks the S&P Aerospace & Defense Select Industry Index, an equal-weighted index of large, mid and small cap stocks.(5) An equal-weighted index gives each company a similar weighting instead of letting the biggest names dominate. XAR has 50 holdings, a gross expense ratio of 0.35% and about $5.0 billion in assets. It launched in September 2011.(5)
Its recent run has been rough. XAR fell 9.95% in September and 18.63% in the third quarter of 2026, and it’s down 7.49% so far this year. Over the year to September 30 it lost 1.59%, though it returned 27.89% a year over three years.(5)
The Global X Defense Tech ETF (SHLD) tracks the Global X Defense Tech Index, which targets companies positioned to benefit from technology, services, systems and hardware for national security, defense and military sectors.(6) It has 50 holdings, charges 0.50% and has about $6.4 billion in assets. It launched in September 2023.(6)
The top of the fund is concentrated. As of October 21, 2026, Palantir (12.41%), RTX (9.12%) and Lockheed Martin (8.71%) made up about 30% of it.(6) Returns have swung widely. SHLD lost 13.45% over the year to September 30, 2026, after returning 36.10% a year over three years. Its index is reconstituted and rebalanced twice a year, and the fund pays distributions twice a year with a 30-day SEC yield of 0.68%.(6)
The iShares Defense Industrials and Tech Active ETF (IDEF), formerly the iShares Defense Industrials Active ETF, is the only actively managed fund here. It doesn’t track an index. Its managers pick companies they believe are well positioned to benefit from rising global defense and security spending, including technology companies that support defense and national security.(7) It’s benchmarked against the MSCI All Country World Index, has 153 holdings, charges 0.55% and has about $3.7 billion in assets.(7)
IDEF launched in May 2025, so its track record is short. It lost 1.45% over the year to September 30, 2026, and has returned 17.22% a year since launch. It’s down 1.32% so far this year, and its 30-day SEC yield was 0.36% as of September 30.(7) Actively managed funds can cost more than index funds, and IDEF’s 0.55% fee is the highest on this list.(7),(1)
Some funds use leverage to chase a multiple of an index’s daily return. We left them out. FINRA says leveraged and inverse products are generally not intended to be buy-and-hold investments, and their returns can diverge from the index over longer periods. That can make them risky long-term or even medium-term investments, especially in volatile markets.(1) If a defense fund advertises “2X” or “3X,” read its description closely before you buy.
| Fund | Best for | Type | Expense ratio | Net assets | 1-year return |
|---|---|---|---|---|---|
| iShares U.S. Aerospace & Defense ETF (ITA) | Broad US exposure | Index | 0.37% | $11.9 billion | -0.80% |
| SPDR S&P Aerospace & Defense ETF (XAR) | Equal-weight exposure | Index | 0.35% (gross) | $5.0 billion | -1.59% |
| Global X Defense Tech ETF (SHLD) | Defense technology | Index | 0.50% | $6.4 billion | -13.45% |
| iShares Defense Industrials and Tech Active ETF (IDEF) | Active management | Active | 0.55% | $3.7 billion | -1.45% |
Net assets are as of October 21, 2026, and 1-year returns are NAV returns as of September 30, 2026.
Buying a defense ETF works like buying a stock:
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Defense ETFs let you invest across the aerospace and defense sector without picking individual stocks. The four funds here take different approaches, from a broad US index to an active strategy, and they charge between 0.35% and 0.55%. World military spending has risen for 11 years straight, but defense funds can still fall hard, as XAR’s 18.63% drop in the third quarter of 2026 shows.(5) Check a fund’s cost, holdings and recent swings before you buy, then open a brokerage account with low costs and the tools you need.
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