Even the coronavirus can’t dent the importance of cybersecurity and that speaks to the long-term viability of ETFs, such as the Global X Cybersecurity ETF (BUG).
Designed to track the Indxx Cybersecurity Index, the Global X Cybersecurity ETF holds a basket of companies that could benefit from increased adoption of cybersecurity technology, including companies whose principal business involves developing and managing security protocols to prevent intrusion and attacks on systems, networks, applications, computers, and mobile devices.
“Cybersecurity focuses on protecting computers, networks, programs, and data from unauthorized and/or unintended access,” said Nasdaq Global Indexes in a recent report. “Cybersecurity has become increasingly important recently as governments, corporations, and people collect, process, and store vast amounts of confidential information and transmit that data across networks.”
Banking on BUG
Hacks, data breaches, and other cyber-enabled crimes have increased in frequency, fueling the need to take steps to protect oneself when using the Internet, according to the FBI. As a result, the cybersecurity investment theme has also taken on increased prominence.
“Data breaches have become almost commonplace in recent years. Over the last few years, high-profile cases of cyber hacks have increased the demand for sophisticated software and security products,” according to Nasdaq. “Companies across the globe are growing more aware of the potential threat which is leading to a greater allocation of resources towards companies that help mitigate such risks.”
Given the greater attention to cybersecurity and the growing industry in an increasingly digitized age, investors can capitalize on the growth potential through sector-specific ETFs, including BUG. BUG is mid-cap ETF with a median market value of $4.4 billion among its 31 components, giving investors a growth profile in a fast-growing niche.
“The impact of cyberattacks has grabbed the attention of the White House, as President Trump has deemed cybercrime one of the biggest issues facing national security,” notes Nasdaq. “In addition, the President’s 2020 Budget is proposing to allocate $17.4 billion in spending to fund critical initiatives and research in the cybersecurity space, a 5% increase from the 2019 budget.”
Concerns over online security and cybercrime have reached an all-time high, with the cost of damages from these activities expected to cost $6 trillion annually by 2021. Data suggest there’s big growth ahead for cybersecurity.
“A forecast from International Data Corporation (IDC) estimated that worldwide spending on security-related hardware, software, and services will reach more than $151 billion in 2023 with a compound annual growth rate (CAGR) of 9.4% over the forecast period of 2019-2023,” according to Nasdaq.
For more on thematic ETFs, please visit our Thematic Investing Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.