Look Ahead to Cybersecurity and Fintech ETFs as a Future Play

Cybersecurity breaches over the years have certainly put the need for preventative measures at the forefront, and that can only intensify as the financial technology (fintech) space continues to advance. For investors looking to park their capital at the current low prices amid the coronavirus outbreak, cybersecurity and fintech ETFs is one area to watch.

“Cybersecurity wasn’t a brand-new discipline in the 2010s, but concerns around the topic were about to go mainstream,” said Riskalyze CEO Aaron Klein in a Wealth Management article. “In 2014, JP Morgan had information compromised on almost 80 million consumers. A few years later, Equifax had data stolen on 150 million people. As more wealth management operations and data moved to the cloud in the past decade, the need to protect their individual firms grew along with it.”

Wealth management firms have always needed processes to vet vendors and ensure employees were following the letter of the law,” Klein added. “At the turn of the century, cybersecurity, to the typical office meant installing anti-virus software on each computer. With the rise of client portals and the ease with which money can be moved digitally now, the burden placed on advisors to create a safe digital environment for client accounts has gotten heavier. Advisors now need to be even more mindful about how they take orders, do their diligence when working with vendors, and have a sharp eye for more sophisticated phishing scam techniques.”


^NACTAC data by YCharts

Cybersecurity, Fintech ETFs to Consider

ETFs can benefit further, such as the First Trust NASDAQ Cybersecurity ETF (NYSEArca: CIBR) and the ETFMG Prime Cyber Security ETF (NYSEArca: HACK). First, on the docket, CIBR seeks investment results that generally correspond to the price and yield f an equity index known as the Nasdaq CTA Cybersecurity IndexSM, which is comprised of securities of companies classified as “cybersecurity” companies by the CTA.

Next, HACK seeks investment results that generally correspond to the price and yield performance of the Prime Cyber Defense Index. The index tracks the performance of the exchange-listed equity securities of companies across the globe that (i) engage in providing cybersecurity applications or services as a vital component of its overall business or (ii) provide hardware or software for cybersecurity activities as a critical component of its overall business.

ETFs to look at in the growing fintech space include the Global X FinTech ETF (NasdaqGM: FINX) and the ARK Fintech Innovation ETF (NYSEArca: ARKF). ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.

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