The mistletoe might be ideal for the kissing, but without aerospace and defense exchange-traded funds (ETFs) in your portfolio, it might be profits that you’re missing. Aerospace and defense ETFs can provide investors with sustainable performance gains as meeting the defense needs of the federal government is a non-cyclical affair.

In September, the Senate approved a wide-ranging, $854 billion bill that includes a $675 billion allocation towards the Defense Department, accounting for almost 80% of the total bill. In short, the United States doesn’t skimp on defense spending, and even with such a large budgetary allocation, it didn’t receive much contention as Senators approved the bill 93-7.

“Critically, after subjecting America’s all-volunteer armed forces to years of belt-tightening, this legislation will build on our recent progress in rebuilding the readiness of our military and investing more in the men and women who wear the uniform,” said Senate Majority Leader Mitch McConnell, R-Ky.

McConnell’s comments support the willingness of the U.S. government to open their wallets for defense spending–an estimated $610 billion goes towards defense, besting the money spent by the next seven countries combined.
Rapid-Fire Returns with this Leveraged Aerospace & Defense ETF 1

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As such, here are four options to consider when looking at aerospace and defense ETFs.

1. iShares U.S. Aerospace & Defense ETF (BATS: ITA)

ITA seeks to track the investment results of the Dow Jones U.S. Select Aerospace & Defense Index composed of U.S. equities in the aerospace and defense sector. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index, which measures the performance of the aerospace and defense sector of the U.S. equity market. Aerospace companies in the index include manufacturers, assemblers and distributors of aircraft and aircraft parts.

2. Direxion Daily Aerospace & Defense 3X Shares ETF (NYSEArca: DFEN)

DFEN seeks daily investment results equal to 300% of the daily performance of the Dow Jones U.S. Select Aerospace & Defense Index, which attempts to measure the performance of the aerospace and defense industry of the U.S. equity market. With its triple leverage, DFEN has produced astounding results–23.31% YTD and almost 65% within the last 12 months.

3. SPDR S&P Aerospace & Defense ETF (NYSEArca: XAR)

XAR seeks to provide investment results that correspond generally to the total return performance of the S&P Aerospace & Defense Select Industry Index, which represents the aerospace and defense segment of the S&P Total Market Index (“S&P TMI”). In seeking to track the performance of the S&P Aerospace & Defense Select Industry Index (the “index”), the fund employs a sampling strategy.

4. PowerShares Aerospace & Defense Portfolio (NYSEArca: PPA)

PPA seeks to track the investment results of the SPADE® Defense Index, which was composed of common stocks of 54 U.S. companies whose shares are listed on the New York Stock Exchange (“NYSE”) or the NASDAQ. These companies are engaged principally in the development, manufacture, operation and support of U.S. defense, military, homeland security and space operations.

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