Geopolitical Tensions Are Heating Up—Here's How to Profit From the Defense Boom

Middle East conflicts, Ukraine-Russia war, U.S.-China tensions over Taiwan—the world’s getting messier by the day. And while that’s bad news globally, it’s actually creating a golden opportunity for defense investors.

Why? Because governments worldwide are opening their wallets. Military budgets are skyrocketing as countries prepare for worst-case scenarios. This defense sector surge has spawned several solid ETFs, but three stand out: XAR, ITA, and PPA. All three have solid ratings, but which one actually delivers returns?

The Defense ETF Showdown: Numbers That Matter

XAR (SPDR Aerospace & Defense) is the lean option. It holds 33 stocks with a dirt-cheap 0.35% expense ratio. Seven of its top 10 holdings score 8+ on TipRanks’ Smart Score system (higher = better stock quality). Performance? 6.3% annualized over three years, 13.3% over a decade. Wall Street gives it a Moderate Buy.

ITA (iShares Aerospace & Defense) is the concentrated play—36 stocks but top 10 holdings make up 76.6% of assets. That’s risky. Plus, it has a chunky 9.3% position in Boeing, which has been a disaster lately. Performance lags: 7.4% over three years, only 5.4% over five years. Same 0.35% fee as XAR.

PPA (Invesco Aerospace & Defense) is the heavyweight. 54 stocks, broader diversification, and here’s the kicker—14.3% annualized returns over three years. That demolishes both competitors and crushes the S&P 500’s 9.5% return. Over five years? 11.6% vs. market’s 15%, but still beats XAR (8.6%) and ITA (5.4%) by miles. Ten-year return: 14.6%, actually beating the broader market’s 13.1%.

The catch? PPA’s expense ratio is 0.65%—nearly double its rivals. But when you’re making that much extra in returns, the fee becomes pocket change.

The Verdict

PPA is the runaway winner here. Yes, you pay more in fees, but the performance speaks volumes. It’s beaten competitors consistently across every time period and actually outpaced the S&P 500 over a decade. In a world that’s getting geopolitically unstable, PPA gives you the cleanest exposure to the defense boom—with receipts to back it up.

Wall Street agrees: Moderate Buy with 6.9% upside from current levels.