Should You Invest in the SPDR S&P Aerospace & Defense ETF (XAR)?

The SPDR S&P Aerospace & Defense ETF (XAR), with $3.25 billion in assets, offers exposure to the industrials sector and has risen 18.94% YTD and 39.63% over the last year. The ETF, with an expense ratio of 0.35% and a dividend yield of 0.57%, holds 37 stocks, with Aerovironment Inc being the top holding at 4.73%; it is considered a medium-risk choice with a beta of 1.06. Alternative ETFs for aerospace and defense exposure include Invesco Aerospace & Defense ETF (PPA) and iShares U.S. Aerospace & Defense ETF (ITA).

Analysis

The SPDR S&P Aerospace & Defense ETF (XAR) provides passively managed exposure to the Industrials - Aerospace & Defense segment, which is currently highly ranked (top 6% by Zacks). With assets exceeding $3.25 billion, XAR tracks the S&P Aerospace & Defense Select Industry Index, a modified equal weight index, distinguishing it from market-cap weighted alternatives. The ETF has delivered significant returns, appreciating 18.94% year-to-date and approximately 39.63% over the last year (as of 06/11/2025). Its competitive annual operating expense ratio of 0.35% makes it one of the least expensive options in its category, complemented by a 12-month trailing dividend yield of 0.57%. The portfolio consists of around 37 holdings, with the top 10 constituents, including Aerovironment Inc. (AVAV) at 4.73%, accounting for about 42.46% of total assets, indicating a more concentrated exposure than some peers. XAR's risk profile is characterized as medium, with a beta of 1.06 and a trailing three-year standard deviation of 21.65%. The ETF holds a Zacks ETF Rank of 2 (Buy), and sentiment signals are strongly positive (0.8 score) with a bullish tone, further supporting its investment case within the aerospace and defense sector.

Key Decisions for Investors

• Investors seeking exposure to the high-performing aerospace and defense sector might consider XAR due to its strong recent performance, low expense ratio, and favorable Zacks ETF Rank of 'Buy'.
• The fund's modified equal-weighting methodology and relatively concentrated portfolio of approximately 37 holdings should be evaluated, as this presents a medium-risk profile (beta 1.06) that may offer differentiated returns but also potentially higher volatility compared to broader market ETFs.