Is State Street SPDR S&P Aerospace & Defense ETF (XAR) a Strong ETF Right Now?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $6.01 billion, this makes it one of the largest ETFs in the Industrials ETFs. XAR is managed by State Street Investment Management. XAR, before fees and expenses, seeks to match the performance of the S&P Aerospace & Defense Select Industry Index.

The S&P Aerospace & Defense Select Industry Index represents the aerospace & defense sub-industry portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Aerospace & Defense Index is a modified equal weight index.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.

It has a 12-month trailing dividend yield of 0.31%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

XAR's heaviest allocation is in the Industrials sector, which is about 100% of the portfolio.

Looking at individual holdings, Axon Enterprise Inc (AXON) accounts for about 3.32% of total assets, followed by Vse Corp (VSEC) and General Electric (GE).

XAR's top 10 holdings account for about 30.91% of its total assets under management.

Performance and Risk

So far this year, XAR has gained about 9.86%, and was up about 22.69% in the last one year (as of 08/03/2026). During this past 52-week period, the fund has traded between $211.91 and $292.74.

The fund has a beta of 1.00 and standard deviation of 23.52% for the trailing three-year period, which makes XAR a medium risk choice in this particular space. With about 49 holdings, it has more concentrated exposure than peers .

Alternatives

State Street SPDR S&P Aerospace & Defense ETF is an excellent option for investors seeking to outperform the Industrials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

Invesco Aerospace & Defense ETF (PPA) tracks SPADE Defense Index and the iShares U.S. Aerospace & Defense ETF (ITA) tracks Dow Jones U.S. Select Aerospace & Defense Index. Invesco Aerospace & Defense ETF has $8.29 billion in assets, iShares U.S. Aerospace & Defense ETF has $14.12 billion. PPA has an expense ratio of 0.58% and ITA changes 0.38%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit

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This article originally published on Zacks Investment Research (zacks.com).

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