Top 10 Defense ETFs to Consider in 2026: A Comprehensive Guide

Defense has gone from a sleepy corner of the market to one of its strongest themes. According to the Stockholm International Peace Research Institute (SIPRI), world military spending hit a record US$2,887 billion in 2025 — the 11th consecutive annual increase — with European spending surging 14% to US$864 billion. On top of that, NATO members agreed at the June 2025 Hague summit to lift defence-related spending to 5% of GDP by 2035 (3.5% core defense plus 1.5% security-related investment). That is a multi-year, government-funded revenue pipeline few other sectors can match.

Defense Exchange-Traded Funds (ETFs) are the simplest way to ride this theme without betting on a single contractor. One ticker gives you a basket of aerospace primes, missile and ammunition makers, defense-tech disruptors, and cybersecurity firms.

This guide covers the top 10 defense ETFs to consider in 2026 — what each fund actually holds, what it costs, who it suits — plus how investors in Malaysia and Singapore can buy them.

Top 10 Defense ETFs at a Glance (2026)

*Approximate figures as of early July 2026. Prices and fund sizes move daily — always check the issuer’s page before buying.

How to Choose a Defense ETF: A Quick Framework

The 10 funds below are not interchangeable. Before comparing tickers, decide on four things:

• Geography: US-centric funds (ITA, PPA, XAR) ride the roughly US$954 billion American defense budget. Global funds (SHLD, NATO, DFNS) and Europe pure-plays (EUAD) capture the faster-growing European rearmament story — European spending rose 14% in 2025 versus a decline in the US, per SIPRI.
• Weighting method: Cap-weighted funds like ITA concentrate heavily in a few giants (GE Aerospace alone is over a fifth of the fund). Equal-weight XAR spreads bets across ~49 names, giving smaller “defense tech” companies real influence on returns.
• Traditional hardware vs defense tech: ITA/PPA/XAR own aircraft, missiles and shipbuilders. SHLD, NATO, CIBR and HACK add software, AI and cybersecurity — the fastest-growing budget lines, but at richer valuations.
• Fund structure: US-listed ETFs are easy to buy from Malaysia and Singapore, but dividends face 30% US withholding tax. Ireland-domiciled UCITS funds (NATO, DFNS) are more tax-efficient for non-US investors and offer accumulating share classes.

iShares U.S. Aerospace & Defense ETF (ITA)

Price (early July 2026): ≈US$245 | Expense ratio: 0.38% | Fund size: ≈US$14 billion

ITA is the biggest and most traded US defense ETF, tracking the Dow Jones U.S. Select Aerospace & Defense Index. It is a concentrated, cap-weighted bet on America’s defense-industrial base: roughly 50 holdings, with the top names dominating.

• Top holdings: GE Aerospace (≈22%), RTX Corporation (≈15%), Boeing (≈9%), TransDigm (≈4.5%), General Dynamics (≈4.5%).
• Sector exposure: US military aircraft, jet engines, missiles and defense electronics, with heavy reliance on Pentagon contracts.
• Good to know: Because GE Aerospace and RTX together approach 40% of the fund, ITA behaves more like a mega-cap aerospace bet than a diversified basket. Its 10-year return (≈14.6% CAGR) has actually lagged equal-weight rival XAR.

Global X Defense Tech ETF (SHLD)

Price (early July 2026): ≈US$63 | Expense ratio: 0.50% | Fund size: ≈US$7.6 billion

SHLD has been the breakout defense fund of the past two years, growing from a small niche product into a multi-billion-dollar giant with a one-year return north of 75%. It tracks the Global X Defense Tech Index, blending US primes, European champions and defense-software names in one basket.

• Top holdings: Lockheed Martin (≈8.4%), RTX (≈7.8%), General Dynamics (≈7.7%), Palantir Technologies (≈7.1%), Rheinmetall (≈5.8%), BAE Systems (≈4.9%), L3Harris (≈4.7%), Hanwha Aerospace (≈4.4%).
• Sector exposure: Defense tech and hardware across the US, Europe and South Korea, including AI-driven military software — a theme we cover in depth in our guide to the best AI ETFs.
• Good to know: The Palantir and Rheinmetall positions give SHLD a growth flavour ITA lacks — and more valuation risk after the huge 2024–2025 run-up.

Invesco Aerospace & Defense ETF (PPA)

Price (early July 2026): ≈US$174 | Expense ratio: 0.58% | Fund size: ≈US$8.2 billion

PPA tracks the SPADE Defense Index with around 63 holdings — a broader, slightly more balanced US basket than ITA. Its top-10 holdings make up roughly half the fund rather than two names dominating.

• Top holdings: GE Aerospace (≈7.3%), RTX (≈7.3%), Boeing (≈6.8%), Lockheed Martin (≈5.8%), General Dynamics (≈4.6%).
• Sector exposure: US aerospace and defense hardware plus meaningful positions in defense IT and space-linked companies.
• Good to know: PPA’s 10-year record (≈17.2% CAGR) beats ITA’s, though its 0.58% fee is the highest of the three big US funds.

SPDR S&P Aerospace & Defense ETF (XAR)

Price (early July 2026): ≈US$274 | Expense ratio: 0.35% | Fund size: ≈US$6.2 billion

XAR takes a modified equal-weight approach to ~49 US aerospace and defense names, so mid- and small-caps drive returns as much as the giants. It is also the cheapest fund on this list.

• Portfolio style: Equal-weight; roughly half the fund sits in small- and mid-cap growth names rather than mega-cap primes.
• Sector exposure: US aerospace and defense, with outsized influence from emerging defense-tech and components makers.
• Good to know: Equal weighting has historically helped — XAR’s ≈17.7% 10-year CAGR is the best of the big three US defense ETFs — and it cushioned the fund when Boeing-style single-stock problems hit cap-weighted rivals.

Select STOXX Europe Aerospace & Defense ETF (EUAD)

Price (early July 2026): ≈US$42 | Expense ratio: 0.50% | Fund size: ≈US$1.2 billion

New to this year’s list, EUAD is a US-listed fund tracking the STOXX Europe Total Market Aerospace & Defense Index — a direct play on European rearmament without needing access to European exchanges.

• What it holds: Europe’s defense champions — think Rheinmetall, BAE Systems, Airbus, Thales, Leonardo and Saab.
• Why it matters in 2026: Europe is where defense budgets are growing fastest (+14% in 2025, per SIPRI), driven by the war in Ukraine, the NATO 5% pledge and the EU’s rearmament financing push.
• Good to know: EUAD returned more than 50% over the past year, and remains one of the few ways to buy the European defense theme on a US exchange.

HANetf Future of Defence UCITS ETF (NATO)

Price (early July 2026): ≈US$21 (accumulating class) | Expense ratio: 0.49% | Fund size: ≈€2.8 billion

With the memorable ticker NATO, this Ireland-domiciled UCITS fund tracks the EQM NATO+ Future of Defence Index: companies headquartered in NATO members and close allies that earn the majority of revenue from defense — including cyber defense, which most traditional funds ignore.

• Top holdings: Safran (≈5.7%), BAE Systems (≈5.4%), Palo Alto Networks (≈5.1%), Lockheed Martin (≈5.1%), Northrop Grumman (≈5.0%) — about 60 holdings in total.
• Sector exposure: NATO-aligned aerospace, munitions and cybersecurity across the US and Europe.
• Good to know: As a UCITS ETF listed in London, Milan and Frankfurt, it suits non-US investors who want to avoid US estate-tax exposure and 30% dividend withholding; the accumulating class reinvests income automatically.

VanEck Defense UCITS ETF (DFNS)

Price (early July 2026): ≈£58.60 on the LSE | Expense ratio: 0.55% | Fund size: ≈€6.6 billion

Europe’s largest dedicated defense ETF, DFNS tracks the MarketVector Global Defense Industry Index. It screens out makers of controversial weapons, which pushes the portfolio towards defense technology, electronics and services rather than every traditional prime.

• Top holdings: RTX (≈9.1%), Palantir Technologies (≈7.1%), Thales (≈6.9%), Curtiss-Wright (≈6.4%), Leonardo (≈6.1%).
• Sector exposure: Global defense systems, military IT, cybersecurity and aerospace across ~55 holdings.
• Good to know: The exclusion screens mean some famous names carry less weight than you would expect, so check the holdings list — this fund is deliberately not a clone of ITA.

First Trust Nasdaq Cybersecurity ETF (CIBR)

Price (early July 2026): ≈US$94 | Expense ratio: 0.58% | Fund size: ≈US$14.3 billion

Modern wars are fought on networks as much as battlefields, and CIBR — the largest cybersecurity ETF in the world — is the mainstream way to own that theme. It tracks the Nasdaq CTA Cybersecurity Index.

• Top holdings: Household cybersecurity names such as Palo Alto Networks, CrowdStrike, Fortinet, Zscaler and Check Point, plus defense-IT crossovers like Booz Allen Hamilton and Cisco.
• Sector exposure: Enterprise and government cybersecurity, cloud security and network defense.
• Good to know: CIBR is a technology fund at heart — it wins when corporate IT budgets grow, not only when defense budgets do. Treat it as a complement to, not a substitute for, a hardware-focused defense ETF.

Amplify Cybersecurity ETF (HACK)

Price (early July 2026): ≈US$109 | Expense ratio: 0.60% | Fund size: ≈US$2.7 billion

HACK was the first cybersecurity ETF ever launched (2014) and remains a solid, slightly smaller alternative to CIBR, tracking a diversified basket of infrastructure-protection, cloud-security and data-protection companies.

• Top holdings: A similar cast to CIBR — CrowdStrike, Palo Alto Networks, Fortinet, Zscaler and Check Point feature prominently.
• Sector exposure: Pure cybersecurity, spanning software, services and hardware vendors.
• Good to know: CIBR has overtaken HACK in assets over the years; performance is broadly similar, so fee, liquidity and broker availability usually decide between them.

Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN)

Price (early July 2026): ≈US$84 | Expense ratio: ≈0.96% | Fund size: ≈US$385 million

DFEN aims to deliver three times the daily return of the Dow Jones U.S. Select Aerospace & Defense Index — the same index ITA tracks, with triple leverage reset every day.

• Who it is for: Experienced short-term traders expressing a conviction view over days, not months.
• The catch: Daily rebalancing means returns over longer periods can drift far below 3x the index (“volatility decay”), and drawdowns are brutal — a 33% index fall would roughly wipe the fund out.
• Good to know: If your plan is to buy and hold the defense theme for years, every unleveraged fund on this list is a more suitable tool.

Also on the radar: the SPDR S&P Kensho Future Security ETF (FITE, ≈US$112, 0.45% fee) — a smaller, futuristic basket spanning cybersecurity, drones and space technology. If drones interest you as a theme, see our guide to the best drone stocks.

Common Pitfalls When Buying Defense ETFs

• Chasing last year’s winner. SHLD’s +75% and EUAD’s +50% one-year runs are rear-view numbers. European defense stocks in particular now trade at historically rich valuations; size positions so a sharp pullback would not derail your plan.
• Owning three funds that are secretly one bet. ITA, PPA, XAR and DFEN all lean on the same handful of US primes. Pairing one US fund with a global or European fund (SHLD, NATO, DFNS, EUAD) adds real diversification; adding a second US fund mostly adds fees.
• Holding a leveraged fund long term. DFEN is a trading instrument. Volatility decay quietly erodes returns even when the index grinds higher.
• Ignoring fund structure and tax. For Malaysian and Singaporean investors, US-listed funds mean 30% withholding on dividends and potential US estate-tax exposure above US$60,000 in US-situs assets. UCITS alternatives (NATO, DFNS) mitigate both.
• Forgetting the politics. Ceasefires, budget fights and export restrictions can hit the sector fast. Defense is a long-cycle theme — treat it as a satellite holding, not your whole portfolio, alongside broad funds like our picks for the best long-term ETFs or defensive assets such as gold ETFs.

How to Buy Defense ETFs from Malaysia & Singapore

All the US-listed funds above (ITA, SHLD, PPA, XAR, EUAD, CIBR, HACK, DFEN) trade on US exchanges, and the UCITS funds (NATO, DFNS) trade in London, Frankfurt and Milan. Here is the practical route:

• Choose a broker with US-market access. Interactive Brokers, moomoo, Tiger Brokers, Webull and eToro all serve Malaysian and/or Singaporean investors and list US ETFs; Interactive Brokers also offers the European exchanges where UCITS funds trade. Compare fees in our guide to the best trading platforms in Malaysia.
• Start small with fractional shares. Several brokers let you buy from as little as US$5 — useful when one XAR share costs ≈US$274. See our fractional shares guide to get started.
• Mind the tax drag. Dividends from US-listed ETFs are hit with 30% US withholding tax. Defense ETFs yield little (often under 1%), so the impact is modest — but income-focused investors should lean towards Irish-domiciled UCITS funds, which face lower internal withholding and offer accumulating classes.
• Fund in USD deliberately. MYR/SGD conversion spreads vary widely between brokers; converting a larger amount once usually beats many small conversions.

Conclusion

Defense ETFs enter 2026 with an unusually visible tailwind: record global military budgets, a binding NATO commitment stretching to 2035, and a European rearmament cycle that is still in its early innings. For most long-term investors, the sensible core picks are a broad US fund (ITA for mega-cap exposure, or XAR for cheaper equal-weight diversification) paired with a global or European fund (SHLD, EUAD, or a UCITS option like NATO or DFNS for tax efficiency). Cybersecurity funds such as CIBR and HACK round out the theme, while leveraged products like DFEN belong only in a trader’s toolkit.

Valuations are no longer cheap after two exceptional years, so stagger your entries, diversify beyond a single sector, and stay invested for the cycle rather than the headline.

Figures verified July 2026 — prices, fees and fund sizes change; confirm with the fund issuer or your broker before investing.

FAQ

Disclaimer: This article is for informational purposes only and does not constitute financial advice. KayaToday is not a licensed financial adviser — always do your own research and consult a professional before making any investment decisions. ETF investments involve risk, including possible loss of principal, and you should only invest what you can afford to lose.