With geopolitical tensions driving U.S. and allied defense spending to multi-year highs, investors are increasingly eyeing the sector for opportunities. While traditional defense ETFs offer a straightforward way to gain diversified exposure to industry giants like Lockheed Martin and RTX, providing stable cash flows from long-term government contracts, they may not satisfy every investor’s appetite.
For those seeking higher octane returns or a bet on the future of warfare and space exploration, a new breed of “hardcore” defense ETFs is gaining attention. These funds offer everything from triple-leverage to pure-play exposure on the final frontier. Here’s a closer look at four distinct ETFs that are pushing the boundaries of defense investing.
Standard aerospace and defense ETFs are excellent core holdings. They provide steady income and diversification across prime contractors. However, they often miss out on the high-growth potential of smaller suppliers, the volatility sought by short-term traders, or the transformative technologies reshaping global security. The following four ETFs carve out unique niches within the defense ecosystem, each with its own risk and reward profile.
Keywords: 3x Leverage, High Risk, Short-Term Trading
DFEN is currently the only ETF offering triple-leveraged exposure to the defense sector. It aims to deliver 300% of the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index. If the index rises by 1%, DFEN is structured to rise by approximately 3%—and losses are magnified just as sharply on the downside.
With approximately $484 million in net assets, the fund’s holdings are concentrated in industry titans like GE Aerospace, RTX, and Boeing. Due to its use of leverage and derivatives, DFEN carries a relatively high expense ratio of 0.96%. The issuer explicitly warns that it is best suited for aggressive investors with a “willingness to accept substantial losses in short periods of time.” Due to the effects of compounding, leveraged ETFs like DFEN are designed for short-term tactical trades rather than long-term buy-and-hold strategies.
Keywords: Space Exploration, Active Management, Growth Style
Managed by Cathie Wood’s ARK Invest, ARKX is an actively managed fund that focuses on space exploration and innovation. Unlike traditional defense funds, ARKX’s portfolio extends beyond established defense contractors. It includes pure-play space companies like Rocket Lab, enabling technology firms like Teradyne, and even companies like Deere & Company, which provide technologies applicable to space missions. The fund’s thesis is to capture opportunities across the entire space value chain, from satellite launches to off-planet resource utilization.
As of March 2026, ARKX manages roughly $821 million in assets, with its top five holdings accounting for about 33% of the portfolio. While its expense ratio is higher at 0.75%, ARKX offers a unique, concentrated bet on the long-term growth of the commercial space industry.
Keywords: Cybersecurity, Drones, Space Systems
FITE tracks the S&P Kensho Future Security Index, a modernized benchmark designed to identify companies at the forefront of next-generation security. This includes firms focused on cybersecurity, advanced border security, military robotics, drones, and space technology. Its holdings are a mix of traditional primes like Lockheed Martin and newer, innovative companies such as Planet Labs and Red Cat Holdings.
With a smaller asset base of about $115 million, FITE offers a compelling expense ratio of 0.45%. The portfolio is diversified across aerospace & defense (37%), systems software (18%), and communications equipment (8%). For investors looking to gain exposure to the technologies defining future conflicts—such as unmanned systems and space-based defense—FITE provides a far more targeted option than a classic defense ETF.
Keywords: Balanced, Mid/Small-Cap, Supply Chain
While not a leveraged or thematic fund, XAR earns its “hardcore” status through its unique construction. It tracks the S&P Aerospace & Defense Select Industry Index, which aims for a more equal weighting across the sector. This means it holds not only the major prime contractors like Lockheed Martin but also a broad range of mid- and small-cap suppliers like ATI, Huntington Ingalls, and Woodward. This structure allows XAR to capture growth opportunities across the entire defense supply chain, reducing concentration risk.
As of March 2026, XAR managed a substantial $6.3 billion in assets. Its top five holdings represent only about 20% of the total portfolio, highlighting its high level of diversification. With an expense ratio of just 0.35%, it’s one of the most cost-effective ways to gain broad, balanced exposure to the entire U.S. aerospace and defense industry.
While all four ETFs operate within the defense sphere, they cater to very different investor profiles:
Regardless of which path an investor chooses, it’s crucial to remember that the defense sector is driven by government budget cycles and geopolitical events. Short-term spikes are often fleeting. True success lies in understanding these long-term industrial trends and selecting the right tools to build lasting returns.
