Which Is the Better Aviation ETF for Long-Term Investors: Defense-Focused MISL or Airline-Focused JETS?

The choice between First Trust Indxx Aerospace & Defense ETF (NYSEMKT:MISL) and U.S. Global Jets ETF (NYSEMKT:JETS) involves deciding between a diversified bet on national security and aerospace technology versus a concentrated wager on global airline travel.

While both funds operate within the broad industrial sector, their underlying drivers differ. JETS is sensitive to fuel costs, consumer spending, and business travel trends, whereas MISL focuses on government defense budgets and aerospace innovation. This comparison explores how these differing strategies affect cost, risk, and portfolio composition.

Snapshot (cost & size)

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

Both exchange-traded funds carry an identical expense ratio of 0.60%, making them equally priced for long-term holders. However, the U.S. Global Jets ETF offers a higher trailing-12-month dividend yield of 0.70% compared to 0.30% for the First Trust fund.

Performance & risk comparison

First Trust Indxx Aerospace & Defense ETF focuses on capital appreciation through its 41 holdings, with a heavy tilt toward industrials at 82.00% and technology at 18.00%. Its largest positions include GE Aerospace (NYSE:GE) at 8.80%, The Boeing Company (NYSE:BA) at 7.48%, and Palantir Technologies (NASDAQ:PLTR) at 7.26%. Launched in 2022, the fund has paid $0.14 per share over the trailing 12 months, which on its recent ~$47 share price works out to a 0.30% yield.

U.S. Global Jets ETF tracks 48 holdings, concentrating 88.00% of its assets in industrials, 8.00% in consumer cyclicals, and 2.00% in communication services. Top holdings include American Airlines Group (NASDAQ:AAL) at 11.37%, United Airlines Holdings (NASDAQ:UAL) at 11.01%, and Southwest Airlines (NYSE:LUV) at 10.46%. Launched in 2015, the fund has paid $0.23 per share over the trailing 12 months, which on its recent ~$33 share price works out to a 0.70% yield.

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What this means for investors

These two funds share a broad aerospace label but could not be more different in what they actually own. MISL invests in the defense industrial base: companies building weapons systems, space platforms, and national security technology. JETS concentrates on commercial aviation: the airlines, airports, and travel infrastructure that move passengers around the world.

That distinction matters enormously right now. Defense spending is at generational highs globally, driven by geopolitical conflict and NATO rearmament, creating a powerful tailwind for MISL's holdings. The airline industry is telling a different story. The global airline industry recently cut its 2026 profit forecast as Middle East conflict has driven up fuel costs and disrupted key air corridors, creating a direct headwind for JETS.

Both funds charge the same fee, so the choice comes down entirely to which industry you believe has more runway ahead. MISL's government contract-backed revenue is predictable regardless of geopolitical turbulence. JETS offers a recovery story with genuine upside if fuel costs ease and travel demand holds, but with far more near-term uncertainty baked in.

Sara Appino has positions in Palantir Technologies. The Motley Fool has positions in and recommends Boeing, GE Aerospace, and Palantir Technologies. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.