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Should You Invest in the SPDR S&P Aerospace & Defense ETF (XAR)?

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If you're interested in broad exposure to the Industrials - Aerospace & Defense segment of the equity market, look no further than the SPDR S&P Aerospace & Defense ETF (XAR - Free Report) , a passively managed exchange traded fund launched on 09/28/2011.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials - Aerospace & Defense is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 13, placing it in bottom 19%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $1.27 billion, making it one of the average sized ETFs attempting to match the performance of the Industrials - Aerospace & Defense segment of the equity market. XAR seeks to match the performance of the S&P Aerospace & Defense Select Industry Index before fees and expenses.

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.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.80%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector--about 100% of the portfolio.

Looking at individual holdings, Spirit Aerosystems Holdings Inc. Class A (SPR - Free Report) accounts for about 4.69% of total assets, followed by Heico Corporation (HEI - Free Report) and Raytheon Technologies Corporation (RTX - Free Report) .

The top 10 holdings account for about 43.77% of total assets under management.

Performance and Risk

Year-to-date, the SPDR S&P Aerospace & Defense ETF has added roughly 3.82% so far, and is down about -0.03% over the last 12 months (as of 03/02/2022). XAR has traded between $107.27 and $136.44 in this past 52-week period.

The ETF has a beta of 1.10 and standard deviation of 31.20% for the trailing three-year period, making it a medium risk choice in the space. With about 34 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P Aerospace & Defense ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XAR is a sufficient option for those seeking exposure to the Industrials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Invesco Aerospace & Defense ETF (PPA - Free Report) tracks SPADE Defense Index and the iShares U.S. Aerospace & Defense ETF (ITA - Free Report) tracks Dow Jones U.S. Select Aerospace & Defense Index. Invesco Aerospace & Defense ETF has $696.67 million in assets, iShares U.S. Aerospace & Defense ETF has $2.77 billion. PPA has an expense ratio of 0.61% and ITA charges 0.42%.

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 Zacks ETF Center.

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