Cybersecurity is becoming more costly and more critical. According to an IBM report, the average cost of a data breach has risen 10% over the past year to $4.88 million, the biggest one-year jump since before the COVID-19 pandemic.
A steady migration to cloud-based IT infrastructure and a hybrid workforce that spends significant time outside the office aren't making security any easier. As a result, cybersecurity is a big and fast-growing industry.
That rising risk is fueling growth across the cybersecurity industry. But individual cybersecurity stocks can be volatile, and it’s not always clear which companies will emerge as long-term winners. For investors who want exposure without betting on a single name, cybersecurity exchange-traded funds (ETFs) offer a diversified way to invest in this expanding market.
Top cybersecurity ETFs
Given the growing demand for cybersecurity, it's no surprise that there are a number of ETF options to choose from.
Exchange-Traded Fund (ETF) | Number of Stocks | Annual Expense Ratio | Assets Under Management |
|---|---|---|---|
First Trust Nasdaq Cybersecurity ETF (NASDAQ:CIBR) | 32 | 0.58% | $10.00 billion |
Amplify Cyber Security ETF (NYSEMKT:HACK) | 23 | 0.6% | $1.97 billion |
Global X Cybersecurity ETF (NASDAQ:BUG) | 29 | 0.51% | $853 million |
iShares Cybersecurity and Tech ETF (NYSEMKT:IHAK) | 38 | 0.47% | $735 million |
WisdomTree Cybersecurity Fund (NASDAQ:WCBR) | 25 | 0.45% | $120 million |
Vanguard Information Technology ETF (NYSEMKT:VGT) | 320 | 0.09% | $130 billion |
Xtrackers Cybersecurity Select ETF (NYSEMKT:PSWD) | 51 | 0.20% | $7.04 million |
1. First Trust Nasdaq Cybersecurity ETF
TSX: CIBR
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2. Amplify Cybersecurity ETF
NYSEMKT: HACK
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NASDAQ: BUG
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NYSEMKT: IHAK
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NASDAQ: WCBR
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6. Vanguard Information Technology ETF
NYSEMKT: VGT
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NASDAQ: PSWD
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Pros and cons of investing in cybersecurity ETFs
Like most investments, there are pros and cons of buying cybersecurity ETFs in your portfolio. Here are a few of the benefits and potential drawbacks:
Pros:
- Broad exposure to cybersecurity without too much exposure to any individual stock.
- Takes the need to research stocks out of the equation.
- You'll make money if the cybersecurity industry does well, regardless of the top performers.
Cons:
- Cybersecurity ETFs tend to have fees on the higher end for ETFs.
- Lower upside potential than investing directly in the top cybersecurity companies.
Factors to consider when choosing a cybersecurity ETF
There are a few things to keep in mind as you start your cybersecurity ETF search, whether you're thinking of buying one of the ETFs discussed here or are evaluating other options:
- Fees - The ETF's expense ratio shows how much you're paying in fees each year, as a percentage of your investment. This shouldn't be the only thing you consider, but if one fund is substantially cheaper than another, it's worth considering.
- Concentration - How much of an ETF's assets are in its largest holdings? Some ETFs are far more "top-heavy" than others, so be sure to check the holdings list.
- Stocks owned - Does an ETF focus on the large and most recognizable cybersecurity companies, or does it primarily own smaller, lesser-known companies? Both can be good ways to invest, but be sure you know what you're buying.
How to incorporate cybersecurity ETFs into your portfolio
Cybersecurity ETFs can serve several purposes in your investment portfolio. For one thing, they can give you exposure to the exciting opportunity of cybersecurity without the homework involved with choosing individual stocks. This way, you can win over the long term regardless of which individual companies end up on top.
They can also add diversification to your portfolio, especially if you don't already have much technology or cybersecurity-specific exposure.
Future outlook for the cybersecurity industry
While there's no way to predict with any accuracy what any individual cybersecurity stocks or ETFs will do over a given period of time, there are some good reasons to consider adding some exposure to your portfolio.
The global cybersecurity market is estimated at about $248 billion in 2026 and is expected to reach nearly $700 billion by 2034, as AI advancements, quantum computing, and other emerging technologies create a growing need for threat detection. AI, in particular, could be both a benefit and a threat, as it creates a massive expansion in the volume of data flowing around the world, but also the possibility of AI-driven malware. In short, while it's tough to pick individual winners, it's fair to say the cybersecurity industry has massive opportunities ahead, which is a strong argument for using the ETF approach to invest.
Cybersecurity is a long-term investment
With computing technology infiltrating every corner of the global economy, cybersecurity is poised to be one of the most important secular growth trends of the next decade and beyond.
Individual stocks that develop security technology services will be volatile, but investing in a basket of them could yield big returns over the long term. An ETF is a quick and easy way to gain investment portfolio exposure to this critical segment of the tech sector.
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FAQ
Cybersecurity ETF FAQ
About the Author
Matt Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cisco Systems and Zscaler. The Motley Fool recommends BlackRock. The Motley Fool has a disclosure policy.
