ETF Talk: ‘HACKing’ Better Profits with a Cybersecurity ETF

“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.

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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.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Forecasts & Strategies, Tactical Trader, TNT Trader, Five Star Trader, Bullseye Stock Trader, and The Deep Woods. His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.