Cybersecurity is a growing industry and many people want to find ways to invest in it. One way to invest is through individual cybersecurity stocks, however some people find individual stocks too risky and would prefer a safer way of investing their money. One way to do this is to buy ETFs. An ETF stands for exchange traded fund and it is a type of security that tracks an index of stocks rather than individual stocks. An index is simply a collection of stocks categorized by performance, industry, or any other variable. The benefit of an ETF is that they can’t be heavily affected by any individual stock’s performance because there are tens or hundreds of stocks within the ETF. This way as long as the overall industry performs well you will likely see an increase in the value of the ETF. A common example of ETFs are those that track the S&P 500, an index of the top 500 companies in the US. As mentioned earlier you can do this by industry as well, this means you can buy an ETF that tracks the top companies in Cybersecurity. In an effort to help people interested in investing in Cybersecurity I’ve put together a list of popular Cybersecurity ETFs that you can purchase on most major stock exchanges.
* Please note this is not financial advice and I am not a financial advisor. Please do your own research before you invest in any of these
8 Cybersecurity ETFs to consider investing in
First Trust NASDAQ Cybersecurity ETF (CIBR)
ETFMG Prime Cybersecurity ETF (HACK)
Global X Cybersecurity ETF (BUG)
iShare Cybersecurity and Tech ETF (IHAK)
WisdomTree Cybersecurity Fund (WCBR)
Rize Cybersecurity and Data Privacy (RCRS.F)
Proshares Ultra NASDAQ Cybersecurity (UCYB)
Simplify Volt Cloud and Cybersecurity Disruption ETF (VCLO)
*For a through breakdown of each of these ETFs look here.
ETFs vs Individual Stocks
Typically choosing between individual stocks and ETFs is a matter of risk vs growth potential. ETFs are less risky because your money will be spread out over a number of different companies that are top of the industry and therefore multiple companies would need to perform poorly for your shares to lose value. However, if you invest in individual stocks then all of your money is within one company and it only takes one company performing badly for you to lose money.
The positive side of individual stocks is that it gives you two things. Firstly, you have complete control of where your money is going. When you put your money in something like an ETF, you don’t directly control which companies your money is invested in, it’s up to the discretion of the manager/algorithm that is being used to make those decisions. Secondly, individual stocks are typically quicker to rise in price than ETFs because it only takes one company going up to in price to increase the value of your investment. While in an ETF, any individual company in that portfolio only has a certain amount of impact on the overall investment. In the end one is the safer but potentially slower route while the other has more risk but the ability to increase in value more quickly. There’s also the small issue of management fees with ETFs. Usually they charge you between 0.3-1% of your ETF value per year in management fees.
ETFs can be a good way to hedge your bets, this way rather than betting on a single company you can invest in the top companies within the industry in one convenient package. Many people may find this more attractive than having to pick individual stocks and being responsible for moving your money around depending on what companies are doing well. ETFs allow for a more passive investment approach where someone else is responsible for choosing the company’s that are held in that portfolio and diversifying your money across good cybersecurity companies.