iShares U.S. Aerospace & Defense ETF vs. State Street SPDR S&P Aerospace & Defense ETF: These Defense ETFs Have a Surprising Difference Investors Should Know for 2027

Investors considering the iShares U.S. Aerospace & Defense ETF and the State Street SPDR S&P Aerospace & Defense ETF should be aware of a key distinction between the two funds: their approaches to investing in the aerospace and defense industry. The iShares fund takes a concentrated approach, focusing heavily on a few major players and prominent commercial aviation businesses, while the State Street fund adopts a broader, more diversified strategy.

With a higher expense ratio of 0.37%, the iShares fund may appeal to investors seeking income through its slightly higher dividend yield of 0.27% on its recent share price of $214.7. However, this concentration leaves the fund vulnerable to underperformance if the few aerospace giants it holds do not deliver strong results. The fund's top holdings include GE Aerospace (21.72%), RTX (16.54%), and Boeing (6.99%), all of which account for nearly 38% of its portfolio.

In contrast, the State Street fund spreads its investments more evenly across aerospace and defense companies, giving greater weight to mid-cap innovators and specialized manufacturers. This equal-weighting approach reduces dependence on any single company and provides broader exposure to emerging defense technologies. Its slightly lower expense ratio of 0.35% and slightly lower 12-month return of 0.2% make it an attractive option for long-term investors seeking a more balanced way to participate in the growth of military modernization and commercial aerospace without overexposing their portfolios to a few industry leaders.