The SPDR S&P Aerospace & Defense ETF, known by the ticker symbol XAR, offers a targeted way to invest in the aerospace and defense sector. Unlike some broader ETFs, XAR focuses on a specific index – the S&P Aerospace & Defense Select Industry Index. This index prioritizes companies within a specific size range, aiming to provide a unique blend of exposure.
XAR takes a distinct approach compared to some competitors. It holds a portfolio of aerospace and defense stocks, weighted to achieve a 40/40/20 split between large-cap, mid-cap, and small-cap companies respectively. This weighting offers investors a chance to benefit from the potential for higher growth often associated with smaller companies, while still maintaining a foundation of established larger players.
The focus on a specific size range comes with its own considerations. While including smaller companies offers the potential for higher returns, it also introduces increased volatility. Additionally, XAR's holdings may not perfectly align with broader aerospace and defense ETFs that might encompass the entire industry spectrum.
The future of the aerospace and defense sector holds promise. Growing demand for commercial aircraft, ongoing military modernization efforts, and the increasing importance of space exploration are all factors that could propel the industry forward. XAR offers investors a way to participate in this potential growth, though it's important to remember the ETF's focus on a specific size range and the inherent volatility of the sector.