7 Best Industrial ETFs for 2026 and How to Invest
Benefits and risks of investing in industrial ETFs
Investing in industrial ETFs has advantages and disadvantages. Some of their benefits include:
- Diversified sector exposure: You can invest broadly in industrial stocks through ETFs.
- Targeted subsector investment: You can also target a specific industrial subsector, such as water or the airline industry, to gain broad exposure to those investment themes.
- Income: Many industrial companies pay dividends, which the ETFs distribute to investors.
On the other hand, investing in industrial ETFs has some notable risks, including:
- Cyclicality: The industrial sector tends to be cyclical, which can make these ETFs more volatile than other sector funds.
- Underperformance potential: An industrial ETF can underperform the S&P 500 and the top industrial stocks.
- Costs: Some industrial ETFs have higher expense ratios, which can eat into your potential returns.
Methodology: How these ETFs were chosen
With over 40 ETFs focused on industrial sectors, investors have many options. I chose the largest ones focused broadly across the sector or on a specific subsector. These seven also stood out for their reasonable expense ratios.
Should you invest in Industrial ETFs?
The industrial sector tends to be cyclical, growing when the economy expands and contracting during a recession. However, several durable trends are driving the industry, including:
- Sustained strong maintenance, repair, and overhaul spending growth in the aerospace industry (3.2% compound annual growth between 2026 and 2035, according to Deloitte).
- Industrial manufacturing companies are investing heavily in AI to automate their operations, increasing efficiency and productivity.
- This rise of AI data centers is driving increased demand for industrial goods such as cooling systems, electrical grid components, and construction equipment.
Given those long-term growth trends, investors should consider adding some exposure to industrial stocks to their portfolios, with the top industrial ETFs a great way to do so.