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Lower Fees, Higher Growth: Why Cost-Conscious Aerospace Investors May Favor XAR Over PPA
Key Points
Invesco Aerospace & Defense ETF carries a higher expense ratio than State Street SPDR S&P Aerospace & Defense ETF but has historically shown lower price volatility.
State Street SPDR S&P Aerospace & Defense ETF utilizes a modified equal-weighting strategy to provide balanced exposure across various market capitalizations.
Invesco Aerospace & Defense ETF has delivered higher total returns over the last five years and currently maintains larger assets under management (AUM).
Invesco Aerospace & Defense ETF (NYSEMKT:PPA) and State Street SPDR S&P Aerospace & Defense ETF (NYSEMKT:XAR) offer concentrated exposure to the defense industry, though they differ significantly in their weighting methodologies and expense structures.
Both funds track the defense and aerospace sectors, but they take different paths to capture this market. While XAR follows a modified equal-weight index to limit individual stock concentration, PPA weights its 68 holdings differently and has been in operation for several more years than its counterpart.
Snapshot (cost & size)
| Metric | XAR | PPA |
|---|---|---|
| Issuer | SPDR | Invesco |
| Share price | $224.87 (as of 2026-10-15) | $155.33 (as of 2026-10-15) |
| Expense ratio | 0.35% | 0.58% |
| 1-yr return (as of 2026-10-15) | (6.9%) | 1.3% |
| Dividend yield | 0.2% | 0.4% |
| Beta | 1.07 | 0.77 |
| AUM | $5.3 billion | $7.3 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
XAR is the more affordable option, with a 0.35% expense ratio compared to PPA's 0.58%. However, PPA currently offers a higher payout, providing a 0.4% trailing yield versus 0.2% for the State Street fund.
Performance & risk comparison
| Metric | XAR | PPA |
|---|---|---|
| Max drawdown (5 yr) | (27.5%) | (18.4%) |
| Growth of $1,000 over 5 years (total return) | $1,872 | $2,143 |
What's inside
Invesco Aerospace & Defense ETF allocates roughly 89% of its portfolio to industrials, 10% to technology, and 1% to basic materials. Its largest positions include RTX Corp (NYSE:RTX) at 9.05%, GE Aerospace (NYSE:GE) at 9.04%, and Boeing Co (NYSE:BA) at 8.83%. The fund holds 68 securities. It was launched in 2005. Invesco Aerospace & Defense ETF has paid $0.66 per share over the trailing 12 months, which, on its recent ~$155.3 share price, works out to a 0.4% yield.
State Street SPDR S&P Aerospace & Defense ETF provides exposure to 50 holdings through a modified equal-weight approach, which reduces the influence of the largest defense contractors. Its top holdings include Honeywell Aerospace Inc (NASDAQ:HONA) at 3.33%, Lockheed Martin Corp (NYSE:LMT) at 3.15%, and Transdigm Group Inc (NYSE:TDG) at 3.12%. It was launched in 2011. State Street SPDR S&P Aerospace & Defense ETF has paid $0.42 per share over the trailing 12 months, which, on its recent ~$224.9 share price, works out to a 0.2% yield.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
When comparing the Invesco Aerospace & Defense ETF (PPA) and the State Street SPDR S&P Aerospace & Defense ETF (XAR), investors should consider several key factors. Let's see what they tell us about each fund.
First, we should examine each fund's strategy. Let's take PPA first. It employs a market cap weighting model. As a result, its top 15 holdings comprise about 68% of its total assets. XAR, by contrast, has a modified equal-weighted strategy. Therefore, smaller, high-growth stocks can impact the fund's performance more than in the case of PPA.
Two other important factors are historical performance and income potential. Over the last five years, XAR has generated a total return of 112%, equating to a compound annual growth rate (CAGR) of 16.2%. PPA, meanwhile, has delivered an 81% total return, with a 12.6% CAGR. Both funds pay modest dividends. PPA has a dividend yield of 0.4%, while XAR's is 0.2%.
One final factor to weigh is cost. XAR has the lower expense ratio of 0.35%, while PPA's is 0.58%. To put that in context, if a person were to buy $10,000 of each fund, they should expect to pay $35 in annual fees for their XAR shares but $58 in annual fees for their PPA shares.
In summary, PPA and XAR are both ETFs focused on aerospace stocks, but they are structured differently and differ in several key respects. For many investors, XAR will be the more appealing of the two funds. It has a lower expense ratio and has performed better historically. It also offers greater diversification due to its weighting strategy.
Jake Lerch has positions in Boeing and Lockheed Martin. The Motley Fool has positions in and recommends Boeing, GE Aerospace, Honeywell Aerospace, Lockheed Martin, RTX, and TransDigm Group. The Motley Fool has a disclosure policy.