Cybersecurity Private Equity

Cyber TRUST™ Index

129

-0

52 Week

223

120

Index at 100 on January 1, 2020

Investing in 2022: 12 Cyber Security Funds to Watch

Technology is getting better, and software systems are becoming more secure every year. The problem? Hackers are also getting smarter each year.

Cyber security threats are growing by the day, not diminishing. And the cost of attacks is growing. The average cost of a data breach for a large company is over $4 million.

This cost is growing, thanks in large part, due to the number of people working remotely these days, which increases cyber security risks and costs. As a result, cyber security stocks and funds have been surging in the previous months, and further growth is anticipated.

Are you wondering which funds are worth investing in, so you can enjoy gains on the fastest growing cyber security companies in the world? Read on below to find 15 funds and stocks to consider buying into today.

1. CIBR

The First Trust NASDAQ CEA Cybersecurity ETF (NASDAQ: CIBR) is the largest fund of its kind. Containing more than 35 stocks in the cyber security industry, this stock gives you the exposure and diversification you need to capture the entire industry with one fund.

The companies included in this fund are largely responsible for building and managing the overall framework of security used by public and private organizations. Some of the largest holdings in the fund include Accenture Plc (ACN), Palo Alto Networks Inc (PANW), and Cisco (CSCO).

CIBR has more than $5 billion in assets under management. And it’s expense ratio is just 0.6%, making this fund reasonably affordable.

2. HACK

Another popular fund for large-scale cybersecurity exposure is the ETFMG Prime Cyber Security ETF (NYSEMKT: HACK). There are more than 60 stocks included in the fund, some of which aren’t officially involved in cybersecurity but are in related industries.

The fund manages about $2.2 billion with an expense ratio of 0.6%. Some of the top holdings in the fund include Cisco Systems Inc (CSCO), Fortinet Inc (FTNT), and Cloudflare Inc (NET).

3. BUG

The Global X Cybersecurity ETF (NASDAQ: BUG) has only been around since 2019 but has caused a stir in the world of cybersecurity venture capital.

The fund manages nearly $1 billion in assets, with an expense ratio of just 0.5%. BUG consists of 31 targeted stocks and is one of the best-performing funds in the cybersecurity space since its inception.

4. IHAK

The iShares Cybersecurity and Tech ETF (NYSE: IHAK), offered by BlackRock, the NYSE FactSet Global Cyber Security Index. The index tracks cybersecurity companies, along with other technology sectors, in both developed and emerging markets for growth potential.

The fund diversified by investing in a blend of multi-cap companies that are paving the way in the industry. The goal is to reap long-term growth potential as these companies emerge to be market leaders.

Most of the fund is invested in US companies, with a handful of stocks from Israel, Japan, Taiwan, and Canada. DocuSign (DOCU) and Juniper Networks (JNPR) are some of the largest holdings.

The fund manages roughly $650 million in assets and has an expense ratio of 0.47%.

5. WCBR

The WisdomTree Cybersecurity Fund (WCBR) is another new fund in the cybersecurity space. It launched at the right time, just after the SolarWinds hack, when all eyes are focused on strengthening the cybersecurity industry across the country.

Rather than weighting holdings by market cap, the WCBR weights holdings through designated themes within the cybersecurity industry. Themes include cloud security, security of things, privacy, smart security, and others.

There’s a big emphasis on companies where more than 50% of revenue comes from cybersecurity products and services.

The expense ratio for WCBR is just 0.45% and the returns have been exceptional.

6. VCLO

Volt Cloud & Cybersecurity Disruption ETF (VCLO) is a very new fund, making its debut at the end of 2020. With just over $1 million in assets, it’s a great fund to keep on your watchlist but might need a longer track record before making any investments.

The fund seeks to focus on the biggest winners of disruptive technology. A majority of assets are focused on Snowflake, CrowdStrike, and the QQQ ETF.

It’s not strictly focused on cybersecurity, but puts a big emphasis on the space. Fund managers are actively adding call option positions on their stocks, and hedging them with puts on the QQQ.

7. UCYB

The ProShares Ultra Nasdaq Cybersecurity (UCYB) has an ambitious goal of achieving daily investment results that are double that of the Nasdaq CTA Cybersecurity IndexSM.

The fund is invested in stocks and derivatives and focuses solely on cybersecurity companies. This leveraged fund seeks outsized returns. But keep in mind that it can also mean outsized losses.

With a fund like this, you’ll want to monitor your holdings daily to ensure ongoing performance and a healthy balance. The expense ratio is higher than others on this list at 0.99%.

8. XKFS

Another newcomer to the cybersecurity space is the SPDR Kensho Future Security ETF (NYSEARCA: XKFS). While it doesn’t market itself as a cybersecurity fund, it holds more than 60 stocks that are all related to the cybersecurity industry.

Holdings include companies from the robotics industry, aerospace, defense, and much more. The fund looks to represent government security spending since various departments of the government will collectively spend billions on cybersecurity in one way or another.

Since so much of the cybersecurity industry directly supports the government and military, it makes sense to invest in funds that match these themes.

9. DTEC

The ALPS Disruptive Technologies ETF (NYSEARCA: DTEC) isn’t a direct cybersecurity fund. Rather, it holds stocks across multiple, underrepresented technology industries, with a focus on disruptive technology.

The fund has a focus on 10 technology themes, one of which is cybersecurity. Each theme has an equal weight within the fund, meaning that cybersecurity plays a meaningful role in the overall performance of the ALPS fund

This new fund has more than $50 million under management with an expense ratio of 0.5%. In its short lifespan, the fund has already seen impressive returns.

10. ITEQ

Israel is home to hundreds of cybersecurity startups and is a global hub for the industry at large. The BlueStar Israel Technology ETF (NYSEARCA: ITEQ) holds 72 different stocks, representing the overall Israeli cybersecurity industry, along with companies from the healthcare, energy, and other industries.

The fund is known to grow at times when US funds are underperforming. And the expense ratio for ITEQ is 0.75%.

11. AIQ

The Global X Future Analytics Tech ETF (NASDAQ: AIQ) focuses on technology companies that stand to benefit from the implementation of artificial intelligence in their products and services. This includes the cybersecurity industry, along with many others.

The fund is not a cybersecurity-exclusive fund but holds some cybersecurity stocks. Many of the stocks are indirect cybersecurity stocks as well.

The fund has an expense ratio of 0.68% per year.

12. PXQ

This technology fund doesn’t focus exclusively on cybersecurity. But the Invesco Dynamic Networking ETF (NYSEARCA: PXQ) adjusts the holdings based on price momentum, earnings, and value, helping to maximize returns.

The PXQ fund has just 30 holdings, some of which are devoted to cybersecurity. PXQ also dedicated 24% of its holdings to small-cap growth stocks, which happen to be the asset class providing the highest returns.

The expense ratio for PXQ is 0.63% per year.

Why Invest in Cyber Security ETFs vs Stocks

Many investors prefer the diversification and risk allocation offered by ETFs. Buying into any of the funds above gives you a balanced portfolio, containing many of the top cyber security companies on the market today.

With an ETF, you can gain exposure to many different companies without having to purchase dozens of individual stocks, and track each ones’ performance.

Investing in an ETF is also the easiest way of exposing yourself to an entire industry, such as cybersecurity. If you anticipate outsized growth in one industry, then you can easily invest in the entire industry through the right fund.

If cybersecurity investing is the next step for your portfolio, then check out the following funds to make the process easy for you.

Size of the Cyber Security Industry

Before investing in a cybersecurity fund, or individual cybersecurity stocks, it’s helpful to know a bit more about the industry.

As of 2020, there were 144,000 cyber security analysts across the country. Demand for cyber security jobs is expected to increase by 33% by 2030.

To get an entry level cyber security job, prospects need to get a cyber security degree, which can be either a bachelor’s or master’s degree. Cybersecurity is based around computer science, and many of the current jobs are available for the government and the military, though many large, private companies are active in this space.

The average cyber security salary is between $70,000 and $85,000, depending on your degree, years of experience, and location.

Additional cyber security certifications are available, alongside degrees, to give applicants an edge. In some cases, these additional certifications, such as CISSP or CompTIA are required in order to continue working in the industry.

Ongoing education is crucial since this field of work is always evolving to face an ever-growing list of cyberattacks.

Need Specialized Cybersecurity Investing Advice?

Cyber security is a complex industry that is changing daily. It takes specialists to stay up to date on all the is taking place in the realm of cybersecurity.

If you want to remain at the forefront of investment in an industry poised for growth, then you can reach out to the experts for help.

If you have any questions regarding long-term cybersecurity investing, then contact us at Option3 to see how our team of cybersecurity investment experts can help.

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