The threat of cybercrime continues to rise globally and this drives the need for solutions to deal with the epidemic. According to MarketsandMarkets, the cybersecurity market is forecast to grow from $15.66 billion in 2018 to $31.82 billion in 2023 resulting in a compound annual growth rate(CAGR) of 15.2%.
Instead of just investing in one or two stocks, Investors looking to profit from this growing market, it will make sense to invest in a wide spectrum of cybersecurity stocks through exchange-traded funds(ETFs). Two ETFs that are dedicated specifically to cybersecurity is c(NASDAQ: CIBR) and the ETFMG Prime Cyber Security ETF(NYSEARCA: HACK).
The Nasdaq CTA Cybersecurity Index is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrial sectors. It includes companies primarily involved in the building, implementation, and management of security protocols applied to private and public networks, computers, and mobile devices in order to provide protection of the integrity of data and network operations.
To be included in the index, a security must be listed on an index-eligible global stock exchange and classified as a cybersecurity company as determined by the Consumer Technology Association (CTA).
Each security must have a worldwide market capitalization of $250 million, have a minimum three-month average daily dollar trading volume of $1 million, and have a minimum free float of 20%.
The index is evaluated semi-annually in March and September, but if at any time during the year other than the evaluation, index security no longer meets the eligibility criteria, or is otherwise determined to have become ineligible for inclusion in the index, the security is removed from the index and is not replaced. Any index security that reaches its foreign investment limit between quarterly re-balances is removed from the index.
The index employs a modified liquidity weighted methodology which includes caps on the percentage of any individual security to derive the final weights of the securities. The index is rebalanced quarterly.
The first and largest ETF to target the cybersecurity industry. An aggressively growing industry, spending has grown 35x from 2003 to 2016 with 2017-2021 spending expected to combine for $1 trillion. As the world becomes more interconnected via technology, there will be a continuous demand for security. The ETFMG Prime Cyber Security ETF (HACK) is a portfolio of companies providing cybersecurity solutions that include hardware, software, and services. HACK is an exchange-traded fund (ETF) that seeks investment results that correspond generally to the price and yield, before fund fees and expenses, of the Prime Cyber Defense Index.
The Prime Cyber Defense Index (PCYBER) utilizes a rules-based investment methodology to select a diverse group of companies actively involved in the cybersecurity industry. Companies are either classified as cybersecurity infrastructure providers or cybersecurity service providers.
HACK Provides a cost-efficient way for investors to own a basket of companies in the cybersecurity industry. The Fund’s portfolio offers convenient diversification across market capitalization, geography, and business focus. As an exchange-traded fund, HACK offers intraday liquidity and portfolio transparency.
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