3 Closely Followed Defense ETFs as Military Budgets Increase

As geopolitical tensions remain elevated and governments continue boosting military spending, many investors are looking for straightforward ways to gain exposure to defense companies. One of the easiest ways to do this is through defense ETFs, which allow investors to invest in the sector without having to select individual stocks. Among the most widely followed options are:

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2. The Global X Defense Tech ETF SHLD -0.51% ▼

3. The iShares U.S. Aerospace & Defense ETF ITA -0.93% ▼

4. The Invesco Aerospace & Defense ETF PPA -0.49% ▼

Although all three funds stand to benefit from rising defense budgets, they are different in both their investment focus and cost structures.

How These ETFs Differ

Starting with SHLD, this ETF takes a more forward-looking approach by focusing on companies involved in defense technology rather than on traditional weapons manufacturers alone. Its holdings include businesses working in areas such as cybersecurity, artificial intelligence, robotics, space systems, and advanced military electronics. Because modern warfare is becoming increasingly digital and automated, this strategy could provide stronger long-term growth potential. However, the approach may also introduce more volatility and carries an expense ratio of 0.50%.

Meanwhile, ITA focuses heavily on the largest U.S. defense contractors, which means that its performance is closely tied to major industry leaders such as Lockheed Martin LMT -1.05% ▼ , RTX RTX +0.73% ▲ , and Boeing BA +2.51% ▲ . Since these companies receive a large portion of the government’s defense spending, ITA often behaves like a direct play on traditional military budgets. In addition, its relatively low expense ratio of 0.38% makes it attractive for investors looking for a cost-efficient and stable long-term option.

Finally, we arrive at PPA, which spreads its investments across a wider mix of aerospace and defense companies in order to reduce concentration risk. As a result, this diversification can provide a more balanced exposure to the sector. However, the trade-off is a slightly higher expense ratio of 0.58%, which could modestly impact returns over time compared with lower-cost funds. Ultimately, investors who want exposure to emerging defense technologies may lean toward SHLD, while those looking stability and low costs may prefer ITA. Moreover, investors who want wide exposure to traditional defense firms might consider PPA.

Wall Street’s Take

Turning to Wall Street, out of the three defense ETFs mentioned above, analysts think that ITA has the most room to run. In fact, ITA’s price target of $280.55 per share implies 22.3% upside potential.

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