Geopolitical tensions have brought a lot of uncertainty to the markets, but investors know one thing for certain: Those tensions will cause countries to put more money into their defense systems and militaries.
When a significant amount of capital flows into any industry, it presents an opportunity for investors. The conflicts surrounding Venezuela, Ukraine and the Middle East have prompted NATO countries to raise their military and infrastructure security budgets. NATO countries have committed to spending 5% of their gross domestic product, or GDP, each year on core defense by 2035. As their economies grow, military spending will also go up.
[Sign up for stock news with our Invested newsletter.]
The U.S. Congress approved $900.6 billion for defense spending in 2026, which will pump cash into some of America’s strongest defense companies and tech winners.
Defense exchange-traded funds, or ETFs, offer investors exposure to reliable companies and emerging leaders without single-stock exposure. All of the funds on this list outperformed the S&P 500 in 2025, and repeat performances are viable amid geopolitical conflicts in 2026:
| ETF | Expense Ratio | Total Assets |
| Invesco Aerospace & Defense ETF (ticker: PPA) | 0.58% | $7.9 billion |
| SPDR S&P Aerospace & Defense ETF (XAR) | 0.35% | $5.9 billion |
| iShares U.S. Aerospace & Defense ETF (ITA) | 0.38% | $13.7 billion |
| Global X Defense Tech ETF (SHLD) | 0.50% | $7.9 billion |
| SPDR S&P Kensho Future Security ETF (FITE) | 0.45% | $124.3 million |
| Select STOXX Europe Aerospace & Defense ETF (EUAD) | 0.50% | $1.3 billion |
| Themes Transatlantic Defense ETF (NATO) | 0.35% | $97.7 million |
Invesco Aerospace & Defense ETF (PPA)
The Invesco Aerospace & Defense ETF focuses on U.S. companies that support defense, homeland security and aerospace operations. It is filled with large, recognizable defense companies like Lockheed Martin Corp. (LMT), RTX Corp. (RTX), Boeing Co. (BA) and GE Aerospace (GE), which make up more than 30% of the entire fund.
Its top 10 holdings make up 56% of the ETF’s total assets, and that relatively high level of conviction in established names has proven to be a winning formula: PPA is a steady performer that has an annualized 17.5% return over the past 10 years. Its average annual returns stay high as you zoom in closer, with three- and five-year annualized returns of 28.5% and 18.2%, respectively.
PPA has $7.9 billion in total assets and a 0.58% expense ratio with a 0.3% 30-day SEC yield.
SPDR S&P Aerospace & Defense ETF (XAR)
The SPDR S&P Aerospace & Defense ETF has left the S&P 500 in the dust with a 52.2% return over the past 12 months and an annualized 17.8% return over the past decade. Those returns are well worth the fund’s competitive 0.35% expense ratio.
XAR has benefited from the strong performance of its top 10 holdings, with positions like BWX Technologies Inc. (BWXT) and General Dynamics Corp. (GD) materially outperforming the S&P 500 to help lead the way. Curtiss-Wright Corp. (CW), L3Harris Technologies Inc. (LHX) and other defense names are also in XAR’s lineup, but none represent more than 3.7% of holdings.
The defense ETF has pared its equity holdings to 41, but it makes the most of them. The strong focus on small- and mid-cap stocks means that most companies in this fund still have plenty of room to grow. They aren’t close to oversaturation or taking too much market share to the point where future growth is strained.
iShares U.S. Aerospace & Defense ETF (ITA)
The iShares U.S. Aerospace & Defense ETF is filled with stocks that specialize in commercial and military aircraft that are made in the U.S. It also contains defense equipment stocks that push returns higher.
The combination of domestic stocks has worked well based on the fund’s annualized 14.8% return over the past decade. Just like with the other defense ETFs, this fund’s annual returns are higher if you look at recent years.
Large-cap stocks dominate this ETF, and some mid-cap growth stocks also show up. However, there isn’t much room for non-growth mid-cap stocks or small-cap stocks as a whole. It’s also heavily concentrated, with about three-quarters of its assets going into the top 10 holdings. GE Aerospace and RTX are the top two holdings, and they make up more than 35% of the fund’s entire portfolio as of late April.
ITA comes with a 0.38% expense ratio and a modest 0.4% 30-day SEC yield.
Global X Defense Tech ETF (SHLD)
The Global X Defense Tech ETF focuses on where military technology will head next instead of where it currently is. Cybersecurity firms and artificial intelligence giants are prominently included in this fund.
Lockheed Martin, General Dynamics and RTX are some of the most heavily weighted positions, holding weightings between 7% and 9%. SHLD is a top-heavy fund, with about 60% of its assets allocated to the top 10 holdings. Rheinmetall AG (RHM.DE) (5.9%) is another notable top-10 holding that more than doubled in 2025.
SHLD’s 0.5% expense ratio leaves investors with a 0.5% SEC yield. But a one-year return of 31.8% sweetens the deal. The defense ETF achieved that return with a strong focus on large-cap military stocks.
SPDR S&P Kensho Future Security ETF (FITE)
The SPDR S&P Kensho Future Security ETF prioritizes new technology that is changing how wars are fought and won. It has a 0.45% expense ratio and nearly $125 million in total assets. Just remember: Lower assets with a small pool of participants can suggest a lower level of liquidity.
FITE’s portfolio is filled with small-cap stocks, which can result in more volatility. Investments such as Planet Labs PBC (PL) and Iridium Communications Inc. (IRDM) lead the way. However, the top 10 doesn’t have as much of an influence on the total portfolio since those positions only make up less than 23% of the entire fund.
This formula for success has produced an annualized 13.9% return over the past five years. That return goes up to 29.2% if you only look at the past three years. As military tech becomes more advanced and smaller companies win big contracts, FITE shares could rally.
Select STOXX Europe Aerospace & Defense ETF (EUAD)
The Select STOXX Europe Aerospace & Defense ETF focuses on European defense stocks. With money and military resources pouring into Ukraine, it’s no wonder this fund outperformed the S&P 500 in 2025, gaining more than 73% in the process.
The fund is relatively new and only has $1.3 billion in assets, along with a 0.5% expense ratio, but its strong start has kept many investors on board. After its stunning performance last year, however, it’s down about 1% year to date. Volatility is an issue with this fund, but some investors may find it worth the risk and an opportune time to get in.
Portfolio diversification isn’t a strong suit for this ETF, as it only contains 19 holdings; the majority of its positions are allocated to large-cap growth stocks, with Airbus SE (OTC: EADSY), Rolls-Royce Holdings PLC (OTC: RYCEY) and Rheinmetall in the top 10.
Uncertainty around U.S. involvement with NATO is ramping up European military spending, which could benefit the EUAD ETF.
Themes Transatlantic Defense ETF (NATO)
The Themes Transatlantic Defense ETF, not-so-subtly using the NATO ticker symbol, prioritizes aerospace and defense companies in NATO countries. The fund has a reasonable 0.35% expense ratio.
RTX, GE Aerospace and Boeing Co. (BA) are the fund’s top three holdings, and they make up roughly 23% of the fund’s total assets. The NATO ETF has 83 holdings, and its top 10 positions make up 60% of assets.
This approach produced more than 50% in gains last year. Like FITE, this fund is relatively new and has low assets. It’s only been around since October 2024. However, its portfolio composition and recent returns suggest it can be a long-term winner if military spending continues to rise.
More from U.S. News
10 Best Growth Stocks to Buy for 2026
7 Best Defense Stocks to Buy Now
7 Best Semiconductor Stocks to Buy for 2026
7 Best Defense ETFs to Buy for 2026 originally appeared on usnews.com
Update 05/08/26: This story was previously published at an earlier date and has been updated with new information.