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With the expansion of digital devices and increasing reliance on technology in all aspects and sectors, the cybersecurity industry continues to grow posing a critical concern for individuals and organizations worldwide. Investors are turning to cybersecurity ETFs to gain exposure to the growing demand for cybersecurity products and services.
The ongoing advances in digitalization and information technology open new opportunities in the business world which is associated with risks like cyberattacks and data breaches on the rise. Therefore, the cybersecurity sector of the economy keeps data and other sensitive content secure using the software. As a result, investors invest in cybersecurity ETFs providing several benefits including diversification, liquidity, and ease of trading. The top-performing cybersecurity ETFs are First Trust Nasdaq Cybersecurity, iShares Cybersecurity and Tech, ETFMG Prime Cybersecurity ETF, etc. Choosing a cybersecurity ETF depends on factors like size, cost, age, income, domicile, etc.
The First Trust NASDAQ Cybersecurity ETF is one of the best cybersecurity ETFs with almost US$5.6 billion in assets under management. First Trust provides one of the most established cybersecurity offerings in the ETF industry. They offer a variety of investment products and its funds date back to 2015. The First Trust Cybersecurity ETF is made up of 35 cybersecurity company stocks traded on the U.S. stock exchange. CIBR, the multi-cap growth fund tracks the NASDAQ index. The index includes companies that are primarily involved in the cybersecurity industry. The benefit of investing in CIBR ETF is its low expense ratio of 0.60% compared to the 1% ratio expense of Cybersecurity ETFs. The ETF's biggest holdings are Cisco Systems Inc., Palo Alto Networks, and Accenture.
The iShares Cybersecurity and Tech ETF is one of the biggest financial institutions in the world owned by BlackRock. Launched in 2019, it is composed of 52 cybersecurity company stocks from tech companies involved in cybersecurity. The IHAK ETF tracks the performance of the NYSE FactSet Global Cybersecurity Index comprised of emerging market and developed market cybersecurity companies. IT stocks comprise 85% of funds' assets. The IHAK's holdings are based in Japan, Israel, and three-quarters of which are in the US. The largest holdings of IHAK include Class A shares of Booz Allen Hamilton Holdings Corp, the other being Junior Networks Inc and also Check Point Software Technologies Ltd.
The ETFMG Prime Cybersecurity ETF is an exchange-traded fund that tracks a portfolio of companies providing cybersecurity solutions including hardware and software services. Came into existence in 2015, it has assets worth US$1.9 billion. The annual expense ratio is estimated to be 0.6% and the value has doubled since its inspection. The ETF is composed of 62 stocks. The HACK ETF tracks the performance of the Prime Cyber Defense Index which includes companies engaged in the cybersecurity industry. The annual return of the ETF performance was 19% as of April 2023. The only downside of HACK EFT is its heavy weighting towards certain companies. As of April 2023, the ETF's top three holdings accounted for over 20% of the portfolio, with Cisco Systems, Palo Alto Networks, and Fortinet being the largest holdings.
The Global X Cybersecurity ETF was launched in the latter half of 2019 and has outperformed both First Trust and ETFMG. It has attracted more than $1.1 billion in investor capital. The BUG ETF seeks to provide investment results that correspond to the price and yield performance of the cybersecurity index. The ETF holds 38 holdings and has an expense ratio of 0.50%. The top holdings of BUG include companies like CrowdStrike Holdings Inc. and Okta Inc. The ETF has a strong focus on software and service providers which account for over 80% of the portfolio. The remaining holdings are in hardware and communication equipment. BUG has returned over 90% in the past 3 years, making it a solid pick for investors seeking exposure to the cybersecurity industry.
Wisdom Tree Cybersecurity Fund is the newest ETF that debuted in January 2021. Although new, it has already become the best Cybersecurity ETF to buy in 2023. Many Cybersecurity companies in technology stocks had hit hard and Wisdom Tree's product reflects a negative return since its launch. The company has accumulated about US$35 million in assets. WCBR ETF tracks the performance of the Wisdom Tree Team8, the index created by a team of cybersecurity experts from Team8, a leading cybersecurity venture group, and WisdomTree, an ETF provider. The low expense ratio of 0.45% results in higher returns for investors over the long term.
