🔥How Defence ETFs Became 2025’s Hottest Investment

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If you’ve been following financial news, you’ve likely seen the defence sector making headlines. In 2025, defence ETFs will have become a top investment choice due to rising geopolitical tensions and advancements in space technology. But why is this happening, and how can you benefit from it without being a military expert? Let’s explore this trend clearly and engagingly—without jargon.

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Why Defence ETFs?

Investors are flooding into defence ETFs for reasons that blend cold economics and hot conflict:

• 🔥Geopolitical Tensions = Guaranteed Demand: Recent global conflicts have prompted governments to increase defence budgets, making the defence sector a key area for long-term growth in 2025. Unlike consumer sectors, defence spending tends to remain stable or even rise during crises—essentially a "recession-proof" investment.

• 💡Tech Innovation Is Redefining Defence: The days of the defence industry limited to tanks and fighter jets are over. Today's defence ETFs include AI-driven cybersecurity, drone swarms, satellite networks, and space-based missile defence. The transformation of the technology means you're investing in the future of warfare, not just traditional military contractors.

  

  Beyond Bullets: How AI & Satellites Are Reshaping Defence ETFs

• 🌍 NATO's 5% Pledge: In June 2025, NATO members brought shocking news to markets by raising defence spending targets from 2% to 5% of GDP, paving the way for a remarkable $2.1 trillion boost for contractors!

Defence isn't just another sector—it's a strategic anomaly in the investing world. Here's why:

• 💰Steady Revenue: Unlike tech startups burning cash, defence contractors have multi-year contracts with governments. The stable contracts create predictable cash flow, even in volatile markets.

• 🎩"Active Investing" Disguised as Passive: Defence ETFs are a form of active sector rotation—you're intentionally overweighting a high-conviction theme rather than passively tracking the market.

• 🛡️Low Correlation to Broader Markets: When Wall Street panics, defence often rises as fear drives defence spending. It's the ultimate "buy the dip" sector.

🏆Top Defence ETFs

Let’s spotlight the ETFs you need on your radar. We’ll keep it simple—no ticker overload, just the essentials.

1. iShares U.S. Aerospace & Defence ETF (ITA)

Inception: 2006-05-01

Expense Ratio: 0.38%

Provider: iShares

Past 5 Years Annualised Performance: 19.08%

$ITA ( ▼ 0.26% )  is the largest defence ETF with a staggering $9 billion in assets. It’s the "blue-chip" of defence investing, with a low expense ratio (0.39%) and heavy exposure to proven contractors. Perfect for "set-and-forget" investors seeking pure defence exposure without the hype.

2. Invesco Aerospace & Defence ETF (PPA)

Inception: 2005-10-26

Expense Ratio: 0.57%

Provider: Invesco

Past 5 Years Annualised Performance: 21.45%

$PPA ( ▼ 0.39% ) mirrors ITA’s holdings but with a slight twist—it leans heavier into smaller defence innovators. Its expense ratio is a tad higher, but the diversification is worth it.

3. SPDR S&P Aerospace & Defense ETF (XAR)

Inception: 2011-09-28

Expense Ratio: 0.35%

Provider: SPDR

Past 5 Years Annualised Performance: 19.91%

Covered by ETF UNO already, $XAR ( ▼ 0.43% ) is the "SPDR" of defence ETFs—simple, transparent, and packed with household names. It has the lowest turnover ratio among defence ETFs, meaning fewer taxable events for your portfolio. Ideal for tax-sensitive investors.

4. Global X Defence Tech ETF (SHLD)

Inception: 2023-09-11

Expense Ratio: 0.50%

Provider: Global X

Past 5 Years Annualised Performance: less than 5 years since inception

$SHLD ( ▼ 1.12% ) ditches the Boeing-heavy playbook to focus on disruptive defence tech—AI, drones, cybersecurity, and electronic warfare. It holds stocks like Palantir (AI defence and intelligence software) and L3Harris (satellite comms). If you believe software will win future wars, this is your ETF.

5. Direxion Daily Aerospace & Defence Bull 3X Shares (DFEN)

Inception: 2017-05-03

Expense Ratio: 0.95%

Provider: Direxion

Past 5 Years Annualised Performance: 43.96%

$DFEN ( ▼ 0.84% ) is an exciting leveraged ETF providing 3x exposure to a diverse index of leading US aerospace and defence companies, showcasing the potential for significant growth! As we always highlight, investors need to understand the high risks of investing in leveraged ETFs while pursuing the high returns.

🛡️Defence ETFs: Your 2025 Portfolio Armor

Defence ETFs shifted from niche to core in 2025 because they offer what few sectors can: revenue certainty in uncertain times. With NATO’s spending boom just starting, this theme has runway.

To recap:

• ✅Defence thrives on geopolitical tension and tech innovation.

• ✅ETFs like ITA, SHLD, and DFEN offer tailored exposure—from blue-chip contractors to leveraged play.

• ✅This isn’t speculative gambling; it’s betting on guaranteed government spending.

So grab a coffee, bookmark this article, and consider adding a slice of Defence to your portfolio. And hey—if you enjoyed this simple breakdown, join the ETF UNO newsletter! We cut through the noise to deliver only what matters for smart ETF investors.

Happy investing, and see you next weekend! 🚀

DISCLAIMER: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research and consider consulting with a financial advisor before making investment decisions.