Why Invest in Defense? The Case for Targeted Exposure

Broadly speaking, when advisors and investors consider adding focused industry exposure to a portfolio, there needs to be a strong justification for doing so. Take the AI industry, for example, where sustained buildout has driven many to target key tech players for exposure.Key Takeaways: The defense industry is offering a compelling case for concentrated investment with multi-year contracts for its key players. Those looking to gain access to the defense industry may wish to look towards a fund like the Invesco Aerospace & Defense ETF (PPA A-). PPA tracks the SPADE Defense Index, which invests in a variety of companies across the defense industry through a modified cap-weighted approach. Given the ongoing geopolitical headlines this year, acquiring focused exposure to the defense industry could make a lot of strategic sense. Especially now, as the industry continues to see its key players sign lucrative contracts.Top Defense Companies Lock in Key ContractsBack at the tail end of July, the U.S. Department of Defense awarded Lockheed Martin a contract worth up to $53.86 billion to manufacture PAC-3 missiles over the course of seven years. That’s not the only big defense contract awarded in recent months. Earlier this week, Boeing (BA) announced it received a seven-year contract from Lockheed Martin to scale up the manufacturing and delivery of PAC-3 missile seekers. According to Boeing, this contract is worth about $14.7 billion. See More: REX Drone ETF DRNZ Glides Past $100 Million AUM Goalpost Such contracts help demonstrate how the U.S. government continues to view the defense industry as a key strategic priority. This is especially true considering that these are multiyear contracts. As such, advisors and investors looking to take advantage of all of this defense spending may wish to do so through a thematic approach. For instance, the Invesco Aerospace & Defense ETF (PPA A-) is worth taking a close look at. PPA provides investment exposure to a variety of companies that work in defense, aerospace, and national security. This is done with the help of the fund’s index, the SPADE Defense Index.The Index AdvantageThe SPADE Defense Index takes a more holistic approach to gaining exposure to the defense industry. Not only does the index invest in traditional defense companies, but it also looks at IT, infrastructure, cyber activities, and more. See More: VettaFi Locks In SPADE Defense Index Acquisition When it comes to constructing its portfolio, the SPADE index applies a modified cap-weighted approach. Security weights are modified to better align with asset diversification frameworks, and the index is updated on a quarterly basis. Furthermore, no single stock can represent more than 10% of the index’s total weight. As a result, PPA has generated strong interest across the broader investment community. Per ETFDb, between January 1, 2026, and October 5, 2026, the fund has seen roughly $866 million in net flows. For more news, information, and analysis, visit the Investing in Defense Content Hub. Invesco Distributors, Inc. is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Invesco Distributors, Inc., nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles. VettaFi LLC (“VettaFi”) is the index provider for PPA, for which it receives an index licensing fee. However, PPA is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of PPA.