The State Street SPDR S&P Aerospace & Defense ETF (XAR 0.54%) offers a lower cost and higher recent growth, while the Invesco Aerospace & Defense ETF (PPA 0.27%) provides lower volatility and a more diversified portfolio.
Both funds target the domestic defense and aerospace industries, yet they use different indexing strategies. Investors typically look to these funds for exposure to government contracting and civil aviation — sectors that often behave differently than the broader industrial market due to long-term federal budget cycles.
Snapshot (cost & size)
| Metric | XAR | PPA |
|---|---|---|
| Issuer | SPDR | Invesco |
| Expense ratio | 0.35% | 0.58% |
| 1-yr return (as of May 27, 2026) | 50.97% | 35.37% |
| Dividend yield | 0.34% | 0.40% |
| Beta | 0.98 | 0.72 |
| AUM | ~$5.9 billion | ~$8.2 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Invesco fund is more expensive for long-term holders, carrying an expense ratio of 0.58% against the 0.35% fee charged by the State Street fund. High management fees can erode compounding returns over time, making the State Street fund a more cost-effective choice for budget-conscious portfolios.
While the Invesco fund offers a higher trailing-12-month dividend yield at 0.40% versus 0.34%, the percentage point difference is relatively narrow.
Performance & risk comparison
| Metric | XAR | PPA |
|---|---|---|
| Max drawdown (5 yr) | (32.40%) | (18.40%) |
| Growth of $1,000 over 5 years (total return) | $2,209 | $2,357 |
What’s inside
The Invesco Aerospace & Defense ETF focuses on companies involved in U.S. defense, homeland security, and aerospace operations. It holds 61 positions and allocates 10% of the portfolio to the technology sector. Its largest holdings include Boeing (BA +1.04%) at 8.38%, General Electric (GE +0.82%) at 8.20%, and RTX Corp (RTX +0.12%) at 6.98%. Launched in 2005, the Invesco fund has paid $0.66 per share in dividends over the trailing 12 months. This broader portfolio provides exposure to diversified contractors while maintaining heavy weights in major industry leaders that drive national security spending.
By comparison, the State Street SPDR S&P Aerospace & Defense ETF tracks an index that uses a modified equal-weighting methodology, which often gives more influence to mid-cap and small-cap companies. This fund holds 41 positions and is highly concentrated in the industrials sector, which accounts for 99% of its assets. Its largest positions include Rocket Lab (RKLB 3.12%) at 6.06%, Carpenter Technology (CRS +1.36%) at 3.38%, and Curtiss Wright (CW +0.04%) at 3.30%. The fund was launched in 2011 and has a trailing-12-month dividend of $0.88 per share.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Both the Invesco Aerospace & Defense ETF (PPA) and State Street SPDR S&P Aerospace & Defense ETF (XAR) have experienced share price increases over the past year due to government increases in defense spending and a heated geopolitical landscape, such as the U.S. war with Iran. These funds differ in their approach, and deciding which to invest in depends on an individual investor’s preference for one strategy over the other’s.
PPA targets the major players supporting U.S. defense, homeland security and aerospace operations. These large companies provide stability and reduced volatility to an investment portfolio, as evidenced by the ETF’s lower beta and significantly smaller max drawdown. This fund is for conservative investors who don’t mind paying a large expense ratio in exchange for lower risk.
XAR’s equal-weighted approach means performance isn’t dependent on a few stocks in the fund. As a result, it delivered an impressive one-year return far exceeding PPA’s. It’s also a less costly ETF. On the flip side, smaller companies can be more volatile, contributing to a greater max drawdown. This fund is for investors who seek balanced exposure across the aerospace and defense sector.
