Aerospace ETF Showdown for Defense Investors: iShares ITA vs. Global X SHLD

The iShares U.S. Aerospace & Defense ETF (NYSEMKT:ITA) provides established exposure to domestic aviation leaders, while the Global X Defense Tech ETF (NYSEMKT:SHLD) offers a newer, technology-focused approach to modern defense.

Investors seeking exposure to the defense sector often choose between broad industry coverage and niche technological plays. While both the iShares U.S. Aerospace & Defense ETF and Global X Defense Tech ETF track aerospace and defense companies, they differ significantly in their cost structures, historical performance, and specific sub-sector weightings. This analysis examines how their different strategies and underlying indexes may impact results for those tracking military-industrial trends.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Expense ratios and dividend payouts provide an immediate point of comparison for cost-conscious investors. The iShares fund is more affordable with an expense ratio of 0.37%, compared to 0.5% for the Global X fund. For those prioritizing income, the Global X fund offers a higher payout, maintaining a 0.43 percentage point yield advantage over the iShares portfolio based on recent distributions.

Performance & risk comparison

What's inside

The iShares U.S. Aerospace & Defense ETF focuses heavily on industrials, which comprise 98% of the portfolio, with the remaining 2% in basic materials. It aims to replicate an index of U.S. companies in the aviation and defense industries and holds 50 positions. Its largest positions include GE Aerospace (NYSE:GE) at 20.91%, RTX (NYSE:RTX) at 16.02%, and Boeing (NYSE:BA) at 7.71%. It was launched in 2006, and has paid $0.57 per share over the trailing 12 months, which on its recent ~$209.3 share price works out to a 0.3% yield.

The Global X-Defense Tech ETF offers a heavier technology tilt at 15% alongside 85% in industrials. It targets firms involved in cybersecurity, robotics, and other modern defense technologies while holding 50 positions. Top holdings include Palantir Technologies (NASDAQ:PLTR) at 11.69%, RTX at 9.05%, and General Dynamics (NYSE:GD) at 8.31%. It was launched in 2023, and has paid $0.42 per share over the trailing 12 months, which on its recent ~$60.8 share price works out to a 0.7% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

Investors seeking exposure to the aerospace and defense industry have two distinct choices in the Global X Defense Tech ETF (SHLD) and iShares U.S. Aerospace & Defense ETF (ITA). The former introduces technology-focused companies into the mix, while the latter offers a more traditional view of the sector. Both have pros and cons, making either an appealing investment, depending on the factors that matter most to you.

I like SHLD because the fund incorporates the future of today's military systems in its holdings, which includes companies that deliver cybersecurity, artificial intelligence, robotics, and drone technologies. For instance, Palantir is the top holding, a signal of the importance of the company's AI capabilities in warfare. Another interesting stock in the ETF is Planet Labs, which provides regular satellite imagery and data about the Earth, an increasingly important insight to military operations. ITA does not include these companies.

That said, ITA is a solid fund delivering lower volatility than SHLD, as demonstrated by its smaller max drawdown. It's also the cheaper ETF and sports a larger AUM for greater liquidity.

Robert Izquierdo has positions in Boeing, General Dynamics, Palantir Technologies, and Planet Labs PBC. The Motley Fool has positions in and recommends Boeing, GE Aerospace, Palantir Technologies, Planet Labs PBC, and RTX. The Motley Fool has a disclosure policy.