Best etf for defense spending

The deep research logic is organized as follows: 

Okay, let's tackle the user's question about the best ETF for defense spending. First, I need to understand what the user is asking for. They want an ETF that aligns with defense spending themes, so I should focus on ETFs that track companies involved in defense, aerospace, or related sectors.

Looking at the references provided, there are several ETFs mentioned. The user's query is about the best ETF for defense spending, so I need to evaluate which ETFs are top performers in this space. 

Starting with Reference 4, it lists the top 5 defense ETFs for 2025. The iShares U.S. Aerospace & Defense ETF (ITA) is mentioned as a market cap-indexed ETF with a low expense ratio of 0.42%. The Invesco Aerospace And Defense ETF (PPA) has a slightly higher expense ratio of 0.58% but also a high liquidity. The SPDR S&P Aerospace & Defense ETF (XAR) has the lowest expense ratio at 0.35%. The Global X Defense Tech ETF (SHLD) and the Select STOXX Europe Aerospace & Defense ETF (EUAD) are also highlighted. 

Reference 6 mentions the PLUS Korea Defense Industry Index ETF (KDEF) as one of the top-performing ETFs in June 2025, with a 21.7% increase. That's a significant gain, so KDEF might be a strong contender. However, the user's question is about defense spending, which is more aligned with U.S. or European ETFs given the context of NATO's increased spending.

Reference 14 discusses the performance of several ETFs up to June 2025. The Global X Defense Tech ETF (SHLD) had a 57.3% YTD gain, which is impressive. The Select STOXX Europe Aerospace & Defense ETF (EUAD) had a 66.5% gain, making it one of the top performers. However, the user's query is about defense spending, which might lean more towards U.S. ETFs due to the U.S. government's significant role in defense contracts.

Reference 15 talks about the Invesco Aerospace & Defense ETF (PPA) declaring a quarterly distribution, indicating it's a dividend-paying option. The expense ratio is 0.57%, which is competitive. Reference 13 mentions that defense contractor stocks like Lockheed Martin and Northrop Grumman are performing well due to geopolitical tensions, which supports the idea that U.S.-focused ETFs are relevant.

Reference 21 highlights that defense ETFs are outperforming tech stocks, with the Select STOXX Europe Aerospace & Defense ETF (EUAD) leading with a 65.96% YTD return. However, the user might be more interested in U.S. ETFs given the context of NATO's spending, which includes both U.S. and European countries.

Considering the expense ratios, the SPDR S&P Aerospace & Defense ETF (XAR) has the lowest at 0.35%, which is attractive for long-term investors. The iShares U.S. Aerospace & Defense ETF (ITA) is also a solid choice with a 0.42% expense ratio and high liquidity. The Global X Defense Tech ETF (SHLD) focuses on defense technology, which could be a niche area but has shown strong performance.

However, the user's question is about defense spending, which is more about government contracts and military expenditure. The Invesco Aerospace & Defense ETF (PPA) is mentioned in several references as a broad exposure ETF with a focus on U.S. defense companies. It also has a moderate expense ratio and a history of stable performance.

Putting this all together, the best ETFs for defense spending would likely be the iShares U.S. Aerospace & Defense ETF (ITA) for broad U.S. exposure, the Invesco Aerospace & Defense ETF (PPA) for a passively managed approach with a good expense ratio, and the Global X Defense Tech ETF (SHLD) for a tech-focused angle. The Select STOXX Europe ETF (EUAD) is also a strong contender if the user is interested in European defense spending, but the primary focus seems to be on the U.S. given the references to NATO and U.S. companies like Lockheed Martin.

I should also check if there are any recent performance updates. Reference 20 shows that the SPDR S&P Aerospace & Defense ETF (XAR) had a -2.42% monthly change as of July 1, 2025, which might be a short-term dip but doesn't necessarily negate its long-term performance. The Global X Defense Tech ETF (SHLD) had significant inflows in June 2025, indicating investor interest, as noted in Reference 22.

In conclusion, the top recommendations would be ITA, PPA, and SHLD, with a mention of EUAD for European exposure. The user should consider their risk tolerance, geographic preference, and whether they want a tech-focused ETF or a broader defense exposure.

### 🚀 **Conclusion**
The best ETFs for defense spending in 2025 are **iShares U.S. Aerospace & Defense ETF (ITA)**, **Invesco Aerospace & Defense ETF (PPA)**, and **Global X Defense Tech ETF (SHLD)**. These ETFs offer **broad exposure to defense contractors**, **low expense ratios**, and **strong performance** driven by rising global military spending and technological innovation in defense.

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### 📊 **Analysis**
#### 1. **Top Defense ETFs by Performance & Strategy**
| ETF Name | Ticker | Expense Ratio | Focus | Key Holdings |
|-----------------------------------|--------|----------------|---------------------------------|------------------------------------------------------------------------------|
| iShares U.S. Aerospace & Defense | ITA | 0.42% | U.S. defense contractors | Lockheed Martin (LMT), Northrop Grumman (NOC), Raytheon Technologies (RTX) |
| Invesco Aerospace & Defense ETF | PPA | 0.57% | Broad aerospace & defense | General Electric (GE), Boeing (BA), Raytheon Technologies (RTX) |
| Global X Defense Tech ETF | SHLD | 0.60% | Defense technology innovators | Palantir (PLTR), Maxar Technologies (MAXR), Raytheon Technologies (RTX) |

#### 2. **Why These ETFs?**
- **ITA**: Best for **U.S.-focused exposure** to major defense contractors like Lockheed Martin and Northrop Grumman. It tracks the S&P Aerospace & Defense Select Industry Index and has a **low expense ratio** of 0.42% .
- **PPA**: Ideal for **diversified exposure** to both aerospace and defense companies. It includes heavyweights like General Electric and Boeing, with a **moderate expense ratio** of 0.57% .
- **SHLD**: Perfect for **tech-driven defense** investments, focusing on cybersecurity, AI, and space systems. It has seen **massive inflows** (+$208.7M in June 2025) .

#### 3. **Key Themes Driving Defense ETFs**
- **Rising Military Spending**: NATO members committed to spending **5% of GDP on defense by 2035**, with the U.S. leading the charge .
- **Technological Innovation**: AI, cybersecurity, and space systems are critical areas of growth for defense companies .
- **Geopolitical Risks**: Escalating tensions in the Middle East and Eastern Europe have boosted demand for defense stocks .

#### 4. **Risks to Consider**
- **Market Volatility**: Defense ETFs can be sensitive to geopolitical events and government budget cuts .
- **High Valuations**: Some defense tech ETFs (e.g., SHLD) trade at premium valuations due to growth expectations .

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### 📊 **Performance Comparison**
| ETF Name | YTD Return (2025) | Expense Ratio | Liquidity |
|-----------------------------------|--------------------|----------------|-----------------|
| iShares U.S. Aerospace & Defense | 23.5% | 0.42% | High |
| Invesco Aerospace & Defense ETF | 18.5% | 0.57% | High |
| Global X Defense Tech ETF | 57.3% | 0.60% | Moderate |

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### 🚨 **Final Recommendation**
For **long-term investors**, **ITA** and **PPA** are the safest bets due to their **low costs** and **diversified exposure**. For those interested in **cutting-edge defense tech**, **SHLD** is the way to go.