One of the most critical components of the technology industry is data protection. The cybersecurity sector is full of rivalry, including major tech firms like Microsoft and Alphabet as well as smaller competitors, such as CrowdStrike and Zscaler.
Given the multitude of firms in the field, selecting a specific stock over another can be a challenge. Fortunately, investors can opt for index funds. The iShares Cybersecurity and Tech ETF (NYSEMKT: IHAK) stands out as one of the best cybersecurity exchange-traded funds (ETFs) available.
Let’s delve into what makes this fund an attractive investment and evaluate how gradual monthly contributions can accumulate into substantial wealth over time.
What does the iShares Cybersecurity and Tech ETF consist of?
The iShares Cybersecurity and Tech ETF is an index fund containing 35 different stocks. Some of the most prominent weightings in the fund include CrowdStrike, Zscaler, Palo Alto Networks, and SentinelOne.
Since its establishment in 2019, the iShares Cybersecurity and Tech ETF has produced an average yearly return of 14.5%. For comparison, this is about 50% higher than the long-term, average annual overall return of the S&P 500, inclusive of dividends.
Naturally, investors must keep in mind that the fund is largely comprised of growth stocks. While the nearly three dozen holdings in the iShares Cybersecurity and Tech ETF offer some diversification, the volatility of its underlying assets can lead to substantial profits or losses in any given year.
Nevertheless, the data protection sector is a changing market that is poised for growth in the long run. And with generative AI now powering numerous technology applications, the cybersecurity landscape seems well-positioned for further gains.
What is the extent of the cybersecurity artificial intelligence (AI) market?
Enterprises of all sizes and even governmental bodies are vulnerable to breaches. The rise of natural language processing (NLP) and machine learning is increasingly valuable in the context of threat detection, fraud prevention, and more. The speed at which AI and cybersecurity measures are being embraced among business entities underscores the significance of these technologies and could act as a gauge for the sector’s expansion.
The estimated global market size for AI in cybersecurity was $19 billion in 2022. However, industry analyses propose that this market could experience a compound annual growth rate (CAGR) of 24% through 2032, culminating in a total size of $155 billion.
Can routine monthly investments genuinely yield wealth?
One of the most widespread misconceptions about investing is that you require a substantial amount of money just to get started. This is a fallacy. While the iShares Cybersecurity and Tech ETF has consistently outperformed broader markets, it’s reasonable to assume that eventually its returns will stabilize as many of its holdings progress into more established companies.
The table below demonstrates how investing $200 per month and achieving an average annual return of 10% can lead to hundreds of thousands of dollars in savings.
Number of Years
Warren Buffett is one of the most well-known advocates of compounding. While the renowned investor has chosen his share of winning individual stocks, he also holds passive funds. As shown in the table above, a disciplined savings strategy can build generational wealth through consistent contributions and patience.
If you have an interest in investing in cybersecurity or AI but do not know where to begin, the iShares Cybersecurity and Tech ETF could be the right fit for you. Its diversified exposure to prominent players in cybersecurity, along with its robust returns, could lead to substantial savings over a long-term timeframe.
Should you invest $1,000 in iShares Trust-iShares Cybersecurity And Tech ETF right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, CrowdStrike, Microsoft, and Zscaler. The Motley Fool has positions in and recommends Alphabet, CrowdStrike, Microsoft, Palo Alto Networks, and Zscaler. The Motley Fool has a disclosure policy.
Data Security Is More Crucial Than Ever. This Unstoppable Index Fund Could Turn $200 per Month Into $236,000 With Little to No Effort was initially published by The Motley Fool