Which Aerospace and Defense ETF Is the Better Buy: State Street's XAR or First Trust's MISL?
2026-08-03 12:37
•Sara Appino •The Motley Fool
• •••• Axe Cap view
XAR Outshines MISL for Aerospace Exposure
Lower fees and broader diversification make XAR the smarter aerospace and defense ETF for South Africans.
South African investors rarely get direct aerospace and defense plays on the JSE, so US ETFs like State Street’s XAR and First Trust’s MISL become a gateway. XAR’s appeal lies in its equal-weighted approach, giving you a solid slice across mid and small-cap players, not just giants like RTX. It charges a lean 0.35% fee and returned over 20% last year—both strong positives. MISL, with its higher 0.6% fee, leans heavily on big defense contractors and tech firms like Palantir, which means less diversification and a more volatile bet on software’s role in defence. The rand’s precarious balance against the USD makes cost-efficiency even more critical: every basis point saved feeds straight into your bottom line when converting returns back home. Be cautious, though. A sudden US defense budget cut or tech regulation could derail the optimistic XAR gains. this is just our opinion and not financial advice
For decent aerospace and defense exposure, buy XAR for its cost-efficient diversification and better recent performance. Avoid MISL unless you want a defensive, tech-tilted angle with higher fees.
- XAR
- MISL
- USD/ZAR
- US defense spending cuts
- Increased tech sector regulation impacting Palantir
6/10
State Street's XAR and First Trust's MISL offer different approaches to aerospace and defense sector exposure. XAR uses an equal-weighted strategy with lower fees (0.35% expense ratio) and broader mid-cap/small-cap exposure, delivering stronger 1-year returns of 20.6%. MISL employs market-cap weighting with higher concentration in defense giants and tech companies, offering lower volatility but higher fees (0.6%) and lower returns (9.6%). For most long-term investors, XAR's lower costs and stronger performance make it the more practical choice.
Our take is based on reporting first published by The Motley Fool.