The aerospace and defense sector is driven by innovation and profits from long-term government contracts.
They say space is the final frontier. And despite the launch of the first American space shuttle in the 1950s, today’s major aerospace companies still have holes deep inside space, standing at the forefront of cutting-edge technology that is invisible to this world. Many of these companies also have reliable revenue streams that come directly from the Department of Defense pockets.
In fact, the finest US Space Force planes created by Boeing have recently returned to Earth safely after spending more than 400 days in orbit.
So it’s an exciting time for the aerospace sector. But before launching an investment in the industry, it’s important to understand what you’re into.
Why invest in the aerospace sector?
The aerospace sector is closely linked to the defense sector. In fact, analysts see it as a unit called the Aerospace Defense Division (A&D).
Today, the aerospace and defense industry offers five markets: military aircraft, missiles, space, commercial airlines and general aviation:
Military aircraft have the largest market share, followed by space systems. This speaks to the ongoing conflicts that have recently been caught up in the world, such as the Ukraine-Russian War and the Israeli-Hamas conflict in the Middle East. These and other fights have led to an increase in government spending around the world. And perhaps Uncle Sam is the biggest customer of the major US aerospace and defense companies. Many are engaged in long-term contracts with the Department of Defense. This could provide these companies with a stable, reliable, large revenue stream.
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It is also important to note that the government allocates part of its budget to defense. This encourages government spending no matter where we are in the economic cycle. And that’s one reason aerospace and defense companies tend to remain stable even in times of economic uncertainty, such as during recession.
Furthermore, A&D companies are the most innovative companies in the world. They are essentially in the business of inventing new technology. From military operations to commercial flights, think of unmanned aircraft. What about virtual and augmented reality used to train simulations? Or do you want to go on a family trip to outer space, which is as common as going to Disneyland? The A&D sector is stepping into all of this.
But remember: the aerospace sector is not just about technology that leaves this Earth. Air travel is reviving with global economic growth and the growing middle class population of the world. This will increase the demand for civil aircraft and aerospace products.
Furthermore, investments in the aerospace sector can provide a new layer of diversification in the portfolio. Industry behaves in ways that may not correlate with other areas of the market. This provides negative side protection.
If you’re interested, there are many ways to invest in the aerospace sector.
Aerospace Stock
One of the most popular ways to invest in the aerospace and defense sectors is to buy private stocks in companies such as SpaceX. You can access these from platforms such as Nasdaq Private Market and OurCrowd. However, private stocks are usually limited to highly accredited investors.
Still, you can invest in some of the biggest public companies in aerospace. Here are some top picks:
Aerospace ETF
If you don’t want to select stocks individually in the aerospace and defense sectors, you can purchase funds (ETFs) traded on exchanges that aim to mimic industry-wide performance. These ETFs are professionally managed funds that hold major stakes across the aerospace and defense industries. Here are some top picks: iShares US Aerospace & Defense Etfinvesco Aerospace & Defense ETFSPDR S&P Aerospace & Defense ETFGlobal X Defense Tech ETFARK SPACE EXPLORATION & INVATION ETF
Risks in the aerospace sector
As the A&D industry relies heavily on government spending, changing budgetary management, international relations and geopolitical tensions can sometimes be a highly unstable sector. It is also highly competitive. Aerospace and defense companies can create technologies that make others outdated. Plus, it’s a highly regulated industry. Additionally, compliance pressures can slow or hinder new technologies from entering the market. This is why it is important to pay attention to what these companies are developing and where they oppose their competitors.
Conclusion
The aerospace and defense sector is driven by innovation and profits from long-term government contracts. But it is a very competitive, regulated market that you need to carefully analyze before investing. It may be best to start by investing in ETFs that track the broader aerospace and defense industries.
Epoch Times Copyright©2025. The views and opinions expressed are those of the author. They are for general informational purposes only and should not be interpreted or interpreted as recommendations or solicitations. Epoch Times does not provide investments, taxes, legal, financial planning, real estate planning, or other personal financial advice. Epoch Times is not responsible for the accuracy or timeliness of the information provided.
