Should You Invest in the iShares U.S. Aerospace & Defense ETF?

Looking for broad exposure to the Industrials - Aerospace & Defense segment of the equity market? You should consider the iShares U.S. Aerospace & Defense ETF ITA, a passively managed exchange traded fund launched on 05/01/2006.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Industrials - Aerospace & Defense is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 1, placing it in top 6%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $6.64 billion, making it one of the largest ETFs attempting to match the performance of the Industrials - Aerospace & Defense segment of the equity market. ITA seeks to match the performance of the Dow Jones U.S. Select Aerospace & Defense Index before fees and expenses.

The Dow Jones U.S. Select Aerospace & Defense Index measures the performance of the aerospace and defense sector of the U.S. equity market.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.84%.

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 99.70% of the portfolio.

Looking at individual holdings, Ge Aerospace GE accounts for about 18.43% of total assets, followed by Rtx Corp RTX and Boeing BA.

The top 10 holdings account for about 76.93% of total assets under management.

Performance and Risk

Year-to-date, the iShares U.S. Aerospace & Defense ETF return is roughly 15.22% so far, and it's up approximately 26.94% over the last 12 months (as of 08/29/2024). ITA has traded between $103.16 and $145.30 in this past 52-week period.

The ETF has a beta of 0.97 and standard deviation of 18.55% for the trailing three-year period, making it a medium risk choice in the space. With about 39 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Aerospace & Defense ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, ITA is a great option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

SPDR S&P Aerospace & Defense ETF XAR tracks S&P Aerospace & Defense Select Industry Index and the Invesco Aerospace & Defense ETF PPA tracks SPADE Defense Index. SPDR S&P Aerospace & Defense ETF has $2.30 billion in assets, Invesco Aerospace & Defense ETF has $3.76 billion. XAR has an expense ratio of 0.35% and PPA charges 0.58%.

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