Which Space and Defense ETF Is the Better Buy: ARK's ARKX or First Trust's MISL?

The ARK Space & Defense Innovation ETF (NYSEMKT:ARKX) provides more aggressive thematic exposure with higher volatility, whereas the First Trust Indxx Aerospace & Defense ETF (NYSEMKT:MISL) offers a lower-cost, passive approach to domestic aerospace.

Investors looking to navigate the expanding aerospace and defense landscape often compare niche thematic funds against broader industry benchmarks. The choice between these two funds involves weighing an actively managed innovation focus against a passive index-tracking strategy, each of which responds differently to geopolitical shifts and technological breakthroughs.

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 ARK Space & Defense Innovation ETF carries a higher price tag with a 0.75% expense ratio, which is characteristic of specialized, actively managed thematic funds. This makes the First Trust Indxx Aerospace & Defense ETF look more affordable for long-term investors with its 0.6% expense ratio.

Performance & risk comparison

What's inside

The ARK Space & Defense Innovation ETF focuses on companies leading in space exploration and orbital technologies. Its portfolio tilts toward industrials at 63%, technology at 21%, and consumer cyclical at 9%. Largest positions include Space Exploration Technologies (NASDAQ:SPCX) at 9.05%, Kratos Defense & Security (NASDAQ:KTOS) at 7.36%, and L3Harris Technologies (NYSE:LHX) at 6.89%. The fund manages 45 holdings. The fund launched in 2021.

The First Trust Indxx Aerospace & Defense ETF tracks the Indxx US Aerospace & Defense Index, mirroring the performance of companies involved in military and commercial aviation. It concentrates more heavily on industrials at 80% and technology at 13%, with 5% in cash and other assets. Top holdings include Palantir Technologies (NASDAQ:PLTR) at 10.01%, RTX (NYSE:RTX) at 8.43%, and The Boeing Company (NYSE:BA) at 7.72%. It currently holds 49 securities. The fund launched in 2022.

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

Which looks like the better buy

Space investing has gone from a niche theme to one of the most-watched sectors of 2026. The SpaceX IPO captured mainstream investor attention, satellite networks are proliferating, and defense spending is hitting generational highs as governments race to establish military presence beyond the atmosphere. Investors can access that opportunity through either fund, but the portfolios behind them look nothing alike.

ARKX is Cathie Wood's active bet on the future of space and defense technology. It takes concentrated positions in companies like SpaceX and L3Harris, targeting the innovators it believes will define the next era of aerospace. That conviction has delivered extraordinary three-year returns, though with nearly double the volatility of MISL. For a lower fee, MISL passively tracks an index of established aerospace and defense companies, such as Palantir and Boeing.

ARKX has outperformed MISL by a wide margin over three years, but active management and higher volatility are the price of that outperformance. If you want space and defense exposure with less turbulence, MISL is the more dependable choice. ARKX is for those who believe Cathie Wood's high-conviction approach to aerospace innovation will continue to pay off.

Sara Appino has positions in Palantir Technologies. The Motley Fool has positions in and recommends Boeing, Kratos Defense & Security Solutions, L3Harris Technologies, Palantir Technologies, and RTX. The Motley Fool has a disclosure policy.