Cybersecurity Without The Commitment

By Todd Shriber via

A slew of high profile data security breaches in recent years coupled with a slew of forecasts calling for exponential spending increases are among the factors highlighting cybersecurity investments.

Unfortunately, the range of cybersecurity threats is nearly limitless. Cyber threats range from hackers pilfering cryptocurrency from web-based wallets to social media companies failing to guard users’ data. More sophisticated cyber threats include cyber terrorism, cyber warfare and corporate espionage.

Traditionally, access to cybersecurity investments has come via three forms: Individual stocks, diversified technology funds with minor cybersecurity exposure or, more recently, exchange traded funds (ETFs) explicitly dedicated to the cybersecurity theme. Each of those options has drawbacks.

In the case of old guard technology sector index funds, those products are usually heavily allocated to the largest technology companies, such as Apple Inc. (AAPL) and Microsoft Corp. (MSFT). That diminishes those funds’ cybersecurity exposure. Conversely, owning individual cybersecurity stocks or funds dedicated to that theme is not for every investor. For the three years ended Nov. 6, 2018, the Nasdaq CTA Cybersecurity Index trailed the Nasdaq-100 Index by nearly 1,000 basis points while being about 100 basis points more volatile on an annualized basis.

Growth Trajectory 

While some cybersecurity investments cannot be considered “perfect,” the industry’s growth trajectory remains compelling. The 2018 BDO Cyber Governance Survey, conducted annually by the BDO Center for Corporate Governance and Financial Reporting, highlights the increasing awareness of cybersecurity needs among board members at major public companies.

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