“Distrust and caution are the parents of security.”
— Benjamin Franklin
Although Benjamin Franklin lived in a time before cybersecurity was even a twinkle in anyone’s eye, he may have been on to something when he said the above quotation. In today’s increasingly interconnected and computer-oriented world, the persistent need to stay one step ahead of malicious actors who want to do us (as a nation) or us (as individuals) harm is an ever-present need. Every week, it seems that we read about either a governmental organization or a company that’s suffered a data breach by unknown but malicious actors, imperiling not just our wallets but, perhaps, even our democracy itself.
As a result, both nations and companies are recognizing the need to invest in more formidable cybersecurity defenses. According to Expert Market Research, the global cybersecurity market is projected to grow to $506.79 billion by 2032 (up from $236.75 billion in 2023). Concurrently, while the Department of Defense’s budget rose 3.2% for 2024, cybersecurity spending’s piece of that budgetary pie rose by more than 15%.
One exchange-traded fund (ETF) dedicated to cybersecurity is the Amplify Cybersecurity ETF (NYSEARCA: HACK). Since HACK’s goal is to produce results that closely correlate to the return of the Nasdaq ISE Cybersecurity Select Index, HACK’s managers select stocks from companies around the world that are dedicated to cybersecurity, regardless of if they are involved with software, hardware or services. While there are market capitalization and liquidity requirements, HACK’s managers will only select companies that derive at least 90% of their revenues from cybersecurity.
Some of the firms whose bonds are in HACK’s portfolio include Broadcom Inc. (NASDAQ: AVGO), Cisco Systems (NASDAQ: CSCO), Palo Alto Networks (NASDAQ: PANW), CrowdStrike Holdings Inc. (NASDAQ: CRWD), General Dynamics Corp. (NYSE: GD), Northrop Grumman Corp. (NYSE: NOC), Fortinet Inc. (NASDAQ: FTNT), Cloudflare Inc. (NYSE: NET) and Zscaler Inc. (NASDAQ: ZS).
As of July 3, HACK has been up 8.97% over the past month and up 2.19% for the past three months. It is currently up 7.86% year to date.
Chart courtesy of www.stockcharts.com.
The fund has amassed $1.7 billion in assets under management and has an expense ratio of 0.60%.
Overall, the HACK ETF may be a good choice for investors looking for exposure to cybersecurity, but it’s important to carefully consider the risks and potential returns before making any investment decisions.
I remain happy to answer any of your questions about ETFs, so do not hesitate to email me. You may see your question answered in a future ETF Talk.