Best Defense ETF Ranked by Fee and Defense Contractor Weight

The cheapest US defense ETFs are SPDR's XAR and Themes' NATO at 0.35%, with iShares' ITA close behind at 0.37%. Cheapest is not the same as most defense, though. On October 2026 holdings, the five big contractors (Lockheed Martin, RTX, Northrop Grumman, General Dynamics, L3Harris) were 36.9% of Global X's SHLD (0.50%), 32.8% of ITA and only 14.3% of XAR. Per dollar actually held in those contractors, ITA is the cheapest dedicated fund, and Vanguard, which has no defense ETF, is cheaper still through its industrials fund.

Most lists of the best defense ETFs sort by past return or by size. That tells you which fund rode the last rally, not what you are buying. A defense fund is a definition of defense with a fee attached, and the definitions differ enough that two funds with the same label can share only half their money.

Every fee and weight below comes from the issuer's fund page or daily holdings file, read October 7 and 8, 2026. iShares and Invesco block automated reading, so ITA and PPA holdings are their top 25 positions as published by stockanalysis.com. We make index construction and backtesting software; we do not sell funds or give investment advice.

Defense ETFs ranked by expense ratio and contractor weight

The last column is the fee divided by the share of the fund in the five big contractors. It answers a plain question: if what you want is Lockheed Martin, RTX, Northrop Grumman, General Dynamics and L3Harris, how much do you pay each year for every $100 of them the fund holds? By that measure the ranking turns over. XAR, tied for the lowest fee, becomes one of the dearest, because its equal weight rule spreads the money across 50 companies and gives each contractor about 3%.

Which defense ETF has the lowest expense ratio?

XAR and NATO have the lowest expense ratio of the US-listed defense ETFs at 0.35%, followed by ITA at 0.37%. SHLD and EUAD charge 0.50%, PPA 0.58% and MISL 0.60%. On a $25,000 position the gap between the cheapest and the dearest is about $62 a year, which matters less than the gap between what the funds hold.

Size is the other cost. ITA ($11.9 billion), PPA ($7.6 billion), SHLD ($6.3 billion) and XAR ($5.5 billion) trade with tight spreads. NATO is the cheap fund to be careful with: it held $89 million on October 8, and on a fund that small the bid and ask spread on a round trip can cost more than a year of its fee. The leveraged Direxion DFEN charges about 0.95% and resets its three times exposure every day, so it is a trading tool, not a fund to hold.

Does Vanguard have a defense ETF?

No. Vanguard has no aerospace or defense ETF or mutual fund. The nearest Vanguard fund is the Vanguard Industrials ETF (VIS, 0.09%), which held the five big contractors at 8.7% of the fund on August 31, 2026, alongside Caterpillar, GE Aerospace, Deere, Union Pacific and Uber. Names that also appear in ITA or XAR made up about 24% of it.

VIS is the cheapest way to hold defense contractors per dollar of exposure, $1.03 a year for every $100 in them, simply because its fee is a quarter of anyone else's. But the other 91% of the fund is railroads, machinery and airlines, so it is an industrials fund with some defense in it. The S&P 500 is thinner still: on SPY's October 7 file, all thirteen aerospace and defense names came to 1.86% of the fund. If you hold VOO, you own almost no defense. Owning a real defense allocation through Vanguard means buying the shares in a Vanguard brokerage account.

What is the best defense ETF for defense contractors?

For the contractors themselves, SHLD holds the most: 36.9% in the five big names on October 7, 2026, plus BAE Systems, Hanwha Aerospace, Rheinmetall and Saab, and no Boeing or GE Aerospace. Its weakness is its first holding. Palantir was 12.5% of the fund. If you think of Palantir as a defense company, that is fine. If you came for missiles and submarines, an eighth of the fund is a software stock with a very different valuation.

ITA is the cheaper route to the contractors per dollar, $1.13 against SHLD's $1.36, but it arrives with a large airline business attached. GE Aerospace was 20.7% of ITA, RTX 15.9% and Boeing 7.6%. Those three are 44% of the fund, and GE Aerospace alone outweighed Lockheed Martin, Northrop Grumman, General Dynamics and L3Harris combined (16.9%). In a year when air travel stops, as in 2020, ITA behaves much more like an airline supplier than a defense contractor.

Is ITA or XAR the better defense ETF?

They are built for different investors, so the better one depends on what you want. ITA weights by company size, so a few large aerospace companies dominate it and its top ten holdings were 74% of the fund. XAR holds about 3% in each of its 50 stocks, so its top ten were only 30%, and small drone and parts makers such as Kratos and AeroVironment get the same weight as Lockheed Martin.

That makes XAR the fund for someone who wants the whole industry, small companies included, and expects the growth to come from new programs rather than the incumbents. ITA is for someone comfortable with the big names and the commercial aviation cycle. They share 24 stocks, but because the weights differ so much, the money they hold in common is only about 49%. Holding both is less redundant than it looks.

Is there a defense ETF without Boeing?

Yes. SHLD held no Boeing and no GE Aerospace on October 7, 2026, and EUAD holds only European companies. Among the broad US aerospace and defense funds, XAR held the least Boeing at 2.8%, ITA held 7.6%, MISL 7.2% and NATO 7.4%. PPA held the most, 9.0%, which made Boeing its largest position.

Boeing is where the definitions split most sharply. It does build military aircraft, tankers and satellites, but most of its revenue comes from airliners, and its results since 2019 have been driven by the 737 MAX and factory quality problems rather than the defense budget. Whether it belongs is a judgment call, and each fund has made it for you.

Which defense ETF should you buy?

Match the fund to the definition you hold:

• The whole industry, evenly: XAR at 0.35%, the most small companies and the least of any one name.
• The big contractors, cheaply: ITA at 0.37%, if you accept GE Aerospace and Boeing at 28%.
• The big contractors with no airline exposure: SHLD at 0.50%, if you accept Palantir at about an eighth.
• Europe's rearmament: EUAD at 0.50%, though three names (Rolls-Royce, Safran, Airbus) are 60% of it and they are mostly civil aerospace too.
• Through Vanguard: there is no fund; VIS gives a thin slice at 0.09%, or buy the shares yourself.

If none of those definitions is yours, say the five contractors plus Kratos, AeroVironment and Huntington Ingalls, capped at 10% each, no fund will sell it to you. That is the case for building the basket yourself: pick the names, set the weights, backtest it against ITA and XAR, and buy the shares at your broker with no expense ratio. Our defense ETF alternative page charts what each fund holds and walks through the four groups of defense stocks, and the same builder works for the neighboring space stocks index, where the argument is about SpaceX instead of Boeing.

Contractor revenue follows contract awards, so it helps to know what the government is about to buy. Investors who follow the primes closely often search open federal contract opportunities by agency to see which programs are coming up for bid. When you trim a fund to switch into your own basket, run the dates through the wash sale calculator first, because selling a fund at a loss and buying it back, or a fund that tracks the same index, within 30 days can disallow the loss.

Fees, assets and holdings change, so confirm them on each fund page before you buy. Indexes is not affiliated with any fund issuer named here, and nothing in this article is investment advice.