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Are Cybersecurity ETFs Worth Your Money?

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May. 11 2021, Published 1:03 p.m. ET

Cybersecurity is in the news in the wake of the Colonial Pipeline ransomware attack. In 2021, cybersecurity stocks are struggling, with growth stocks out of favor and increasing bond yields putting pressure on the tech sector. However, the Colonial Pipeline incident could boost the long-term growth outlook for cybersecurity companies.

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Investors can buy ETFs, which own a basket of best cybersecurity stocks, to gain wide exposure to that market. What are the best cybersecurity ETFs to invest in and how do they compare?

cybersecurity etf investment
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How to invest in cybersecurity companies

Investors looking to benefit from this trend should consider investing in a diverse range of cybersecurity stocks through ETFs. This is mainly because betting on individual stocks can be particularly risky in young and rapidly changing sectors. Cybersecurity ETFs offer diversification across the sector and investors avoid the risks involved with picking individual winners.

Best cybersecurity ETFs

Certain cybersecurity ETFs are good for investors to buy, including: 

  • the ETFMG Prime Cyber Security ETF (HACK)
  • the First Trust NASDAQ CEA Cybersecurity ETF (CIBR) 
  • the Global X Cybersecurity ETF (BUG)
  • the iShares Cybersecurity and Tech ETF (IHAK)
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The HACK ETF has $2.0 billion in assets under management and an expense ratio of 0.60 percent. This ETF is a set of 60 stocks with a focus on comparatively small companies in the security industry. The holdings include names like Cisco, Proofpoint, and Fortinet. The HACK ETF has returned nearly 28 percent over the past year and offers an annual dividend yield of 0.10 percent.

cybersecurity etf list comparison
Source: Koyfin

HACK Stock Price

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The CIBR ETF is the largest cybersecurity ETF with $3.5 billion in assets under management. The ETF consists of 40 stocks in the cybersecurity sector and has an expense ratio of 0.60 percent. The holdings include names like Cisco, Accenture, Splunk, and CrowdStrike Holdings. The CIBR ETF has returned nearly 38 percent over the past year and offers an annual dividend yield of 0.20 percent.

The BUG ETF launched at the end of 2019. As a result, it has lower assets under management than its competitors with just $341 million. The ETF consists of 27 stocks in its portfolio and has an expense ratio of just 0.50 percent. The holdings include names like Fortinet, Palo Alto Networks, CrowdStrike Holdings, and Proofpoint. The BUG ETF has returned nearly 40 percent over the past year and offers an annual dividend yield of 0.47 percent.

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The IHAK ETF has $454 million in assets under management and has an expense ratio of 0.47 percent. This ETF is a set of 42 stocks with a focus on the cybersecurity sector. The holdings include names like Fortinet, Proofpoint, Juniper Networks, and VMware. The IHAK ETF has returned nearly 30 percent over the past year and offers an annual dividend yield of 0.40 percent.

Global cybersecurity market's forecast

The global cybersecurity market size is anticipated to rise at a CAGR of 10.9 percent through 2028 as cybercrime and cyberattacks impact more individuals, businesses, and governments. As a high-growth segment of the technology market, investing in cybersecurity stocks offers investors lots of upside potential in the next decade.

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