Which Aviation ETF Is the Better Buy: State Street's Defense-Focused XAR or U.S. Global's Airline-Centric JETS?

State Street SPDR S&P Aerospace & Defense ETF (NYSEMKT:XAR) provides broad-based industrial exposure at a lower cost than the airline-focused U.S. Global Jets ETF (NYSEMKT:JETS), which targets a more specific transportation niche.

Investors seeking exposure to flight and national security often compare these two funds. The State Street fund tracks a broad aerospace and defense index using a modified equal-weighting strategy, while the US Global fund concentrates specifically on global airline operators and aircraft manufacturing companies.

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-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The State Street fund is the more affordable option for long-term investors, featuring a 0.35% expense ratio. The US Global fund carries a higher fee of 0.6% but currently offers a higher payout with its 0.7% yield.

Performance & risk comparison

What's inside

The State Street SPDR S&P Aerospace & Defense ETF tracks an index that uses a modified equal-weighting approach, spreading its assets across 47 holdings. Its portfolio is composed of 96% industrials, 3% basic materials, and 1% technology. Its largest positions include Axon Enterprise (NASDAQ:AXON) at 3.25%, Karman Holdings (NYSE:KRMN) at 3.24%, and VSE Corp (NASDAQ:VSEC) at 3.21%. The fund was launched in 2011. State Street SPDR S&P Aerospace & Defense ETF has paid $0.81 per share over the trailing 12 months, which on its recent ~$288.3 share price works out to a 0.3% yield.

The U.S. Global Jets ETF provides a more targeted play on the recovery and growth of global travel, holding 45 positions. While its sector breakdown is not reported, its largest positions include United Airlines Holdings (NASDAQ:UAL) at 10.90%, American Airlines Group (NASDAQ:AAL) at 10.54%, and Delta Air Lines (NYSE:DAL) at 10.50%. The fund was launched in 2015. U.S. Global Jets ETF has paid $0.23 per share over the trailing 12 months, which on its recent ~$31.4 share price works out to a 0.7% yield.

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Which looks like the better buy

These two ETFs share a broad aerospace label, but they occupy completely different corners of the industry. XAR owns the companies that build the planes, weapons systems, and defense technology that governments around the world are currently buying at a generational pace. JETS owns the companies that fly passengers from city to city, where profit margins depend heavily on fuel costs, consumer confidence, and geopolitical stability.

That distinction shapes everything about how each fund behaves over time. Defense contracts are long-term, government-backed, and largely immune to economic cycles. Airline revenues are the opposite, deeply sensitive to fuel prices, consumer spending, and events outside any company's control. JETS has delivered competitive returns over the past year, but its five-year drawdown history reflects just how punishing the airline business can be when conditions turn.

XAR charges significantly less than JETS and manages nearly eight times the assets. For most long-term investors, that combination of lower cost, defense sector tailwinds, and more predictable revenue streams across its holdings makes XAR the stronger buy today. JETS is a better fit for investors who specifically want commercial aviation exposure and believe in the airline industry's recovery.

Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axon Enterprise, Karman, and Vse. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.