BUG - 4 Cybersecurity ETFs for Investors

While the term cybersecurity originated in 1989, the industry has gained significant traction in the last few years thanks to a rising number of data breaches and cyber attacks.

Cybersecurity is defined as the measures taken to protect a computer or computer system against unauthorized access or cyber attack.

The number of security incidents is increasing every year, along with the costs. According to a 2019 research report by IBM (NYSE:IBM), a single data breach event could cost an organization nearly US$4 million—up 12 percent since 2014.

In terms of overall cyber threats, a 2019 Juniper Research report on cyber crime suggests that the cost of such malicious attacks will rise to US$5 trillion by 2024.

A report issued by the Government of Canada in 2018 also highlights the global market, stating that cybercrimes were projected to cost billion in economic losses that year. The report also highlighted that the cybersecurity technology industry is anticipated to reach over US$202 billion by 2021 worldwide.

There are multiple ways to invest in the cybersecurity market, such cybersecurity stocks. ETFs offer a low-cost alternative for investing in this space. ETFs’ fees and expenses are typically lower than that of a mutual fund or another type of actively managed financial instrument. According to ETF.com, there are four cybersecurity ETFs listed in the US that investors can add to their portfolio. Here, we take a closer look at some of the core holdings and features of three security ETFs. All numbers and figures are as of market close July 21, 2020.

1. ETFMG Prime Cyber Security ETF (ARCA:HACK)

AUM: US$1.42 billion; current price: US$47.15

The oldest of the two pure play cybersecurity ETFs is ETFMG Prime Cyber Security, which began trading November 2014 and tracks the ISE Cyber Security Index. Hack has 60 holdings with a 0.60 percent expense ratio and assets under management (AUM) standing at over US$1.42 billion. This first of our cybersecurity ETFs has an 8.57 percent annualized return since inception. The ETF is run by ETFMG, a lesser-known company amongst the goliath ETF managers in the space.

The ETF’s top holdings include Cisco (NASDAQ:CSCO) with a 3.73 percent weighting, Cloudflare Inc. (NYSE:NET) at 3.25 percent, Sailpoint Technologies (NYSE:SAIL) at 3.2 percent, and Splunk (NASDAQ:SPLK) at a 3.11 percent weight.

2. First Trust NASDAQ CEA Cybersecurity ETF (NASDAQ:CIBR)

AUM: US$1.93 billion; current price: US$34.79

Launched in July 2015, CIBR tracks the NASDAQ CTA Cybersecurity Index and has 44 holdings. The fund has a 80.71 percent allocation in the software and IT services sector and 8.79 percent in communications and networking equipment. The expense ratio is similar to HACK at 0.60 percent.

CIBR’s top cybersecurity stocks include CrowdStrike Holdings (NASDAQ:CRWD) at a 6.64 percent weighting, Splunk at a 6.19 percent weighting, Okta (NASDAQ:OKTA) weighted at 6.10 percent and Cisco at a 5.62 percent weighting.

3. iShares Cybersecurity and Tech ETF (ARCA:IHAK)

AUM: US$94.57 million; current price: US$32.97

Next on our cybersecurity ETFs list is the iShares Cybersecurity and Tech ETF. Founded in June 2019, IHAK tracks the NYSE FactSet Global Cyber Security Index with a sector focus on developed and emerging markets in the cybersecurity industry. This newer fund has an expense ratio of 0.47 percent and over US$94.57 million in assets under management.

IHAK’s top holdings include DocuSign (NASDAQ:DOCU) weighted at 5.39 percent, Zscaler, Inc (NASDAQ:ZS) at 4.65 percent and Okta at a 4.4 percent weighting.

4. GlobalX Cybersecurity ETF (NASDAQ:BUG)

AUM: US$29 million; current price: US$21.43

The newest ETF on the list is the GlobalX Cybersecurity ETF. Founded in October 2019, tracks a market-cap-weighted global index of companies selected on the basis of revenue related to cybersecurity activities. This fund has an expense ratio of .50 percent and US$29 million in assets under management.

BUG’s top holding include Zscaler weighted at 8.8 percent, Okta at 6.58 percent, Palo Alto Networks (NYSE:PANW) at 5.97, and Fortinet (NASDAQ:FTNT) at 5.84 percent.

This is an updated version of an article originally published by the Investing News Network in 2018.

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.