iShares vs. Tema: Which Aerospace ETF Fits Your Portfolio?

The choice between iShares U.S. Aerospace & Defense ETF (NYSEMKT:ITA) and Tema Space Innovators ETF (NYSEMKT:NASA) depends on whether an investor prioritizes established industrial giants or specialized space infrastructure and private technology exposure.

Aerospace and defense investing often balances steady government contracts with the high-risk, high-reward potential of orbital exploration. While one fund focuses on the proven contractors that currently dominate the sky, the other looks toward the companies building the infrastructure for the next century of space travel. This comparison looks at how these strategies differ in cost and risk. Both funds target the final frontier, but they approach the aerospace sector from vastly different angles. The iShares fund tracks a market index of established U.S. aviation and defense companies that form the backbone of the industry. In contrast, the Tema ETF seeks out innovation in satellite communications, launch systems, and space-based data across global markets, including emerging ones.

Snapshot (cost & size)

The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The iShares fund is the more affordable option with an expense ratio of 0.38%, which is roughly half the 0.75% fee charged by the Tema ETF. This lower cost can have a significant impact on total returns over the long term, particularly for investors looking for broad industry exposure without the higher price tag of an actively managed or specialized innovation strategy.

Performance & risk comparison

What's inside

The iShares ETF has a narrow focus on traditional aerospace and defense components. Its portfolio contains 49 holdings, and its largest positions include GE Aerospace (NYSE:GE) at 21.49%, RTX (NYSE:RTX) at 14.6%, and Boeing (NYSE:BA) at 9.28%. This fund was launched in 2006 and has a trailing-12-month dividend payout of $1.06 per share. It’s a pure play on domestic defense and commercial aviation infrastructure, primarily focusing on large-cap companies that are established leaders in the aerospace market.

The Tema fund is significantly younger, having launched just this year. Its largest positions include SpaceX Spv Exposure at 10.6%, EchoStar (NASDAQ:SATS) at 9.83%, and Rocket Lab USA (NASDAQ:RKLB) at 9.68%. Unlike the iShares fund, NASA doesn’t pay a dividend and holds a variable number of securities across multiple geographies and market capitalizations. The ETF incorporates select private or less liquid securities and depositary receipts to capture innovation in satellite systems and propulsion technologies. It emphasizes forward-looking assessments of business models that support growth in space-based capabilities.

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

What this means for investors

I think the easiest way to summarize these ETFs is thusly:

The question is: How spicy do you like your ETFs? I wouldn't say NASA is ghost pepper hot, exactly, but it's pretty speculative even at a glance. If I were the sort of investor who likes a fair amount of risk and wanted to buy shares, I would limit myself to a very small position. Like thimble sized.

It's also worth noting the concentration risk in ITA. The top three positions account for nearly half of the portfolio (and the top 10 make up 75% of the fund). So it may seem relatively more conservative compared to NASA, but I personally wouldn't be comfortable with that level of concentration. (Apparently, the level of spice I seek in my ETF investments is “mayonnaise.”)

Erin Kennedy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing, GE Aerospace, RTX, and Rocket Lab. The Motley Fool has a disclosure policy.