Investing in cybersecurity stocks

Data breaches and hacks can impact the sensitive information of businesses, organizations and individual people. Cybersecurity helps prevent these cyberattacks, and the demand for cybersecurity is expected to soar in the coming years.

What are cybersecurity stocks?

Cybersecurity stocks include companies that offer cybersecurity consultation for businesses and organizations. It also covers cyber recovery solutions if you’ve been a victim of a cyberattack.

Cybersecurity is the art of defending networks, systems and data from digital attacks. These cyberattacks attempt to access information without authorization. They are designed to steal or destroy data, extort money or for other criminal use.

Why invest in cybersecurity stocks?

Cybercrime costs global economies about $600 billion every year, according to the Center for Strategic and International Studies. That’s an increase from the estimated worldwide losses of $445 billion in 2014 and isn’t predicted to decline.

The rise of cyberattacks has prompted public and private organizations to look for solutions to protect themselves from these dangerous and costly breaches. The global cybersecurity market is predicted to grow from $149 billion to $208 billion by 2023, according to a Cybersecurity Global Market Report.

With the growth of cybercrime, firms and governments will turn to cybersecurity companies for help. And since more than half the world is now online and the demand for cybersecurity is more pressing than ever, it might be a good time to invest in cybersecurity stocks.

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Risks of investing in cybersecurity

Cybersecurity is a newer industry that got its start with antivirus software and firewalls in the late 80s. Unfortunately, many cybersecurity stocks are based on private companies that are fairly new. And since tech moves fast in the cyber world, smaller, newer companies may struggle to keep up or incur a lot of debt.

Investors may also have trouble gauging winners in the cybersecurity space because the industry is based on hindsight. For example, it is only after a cyber attack that you can definitively evaluate companies and how effective they were in preventing the attack.

The cybersecurity sphere can be volatile as investors and companies are finding their footing.

Cybersecurity stocks

Cybersecurity stocks cover companies that bolster cyber defenses through various services, including hardware and cloud-based software.

What ETFs track the cybersecurity category?

Exchange-traded funds (ETFs) allow you to invest in a spectrum of cybersecurity stocks.

Are there any cybersecurity ETFs that trade on Canadian stock exchanges?

Evolve Cyber Security Index ETF Hedged trades on the Toronto Stock Exchange, but you’ll have a hard time finding other options in Canada at present. If you want to invest more heavily in cybersecurity stocks, you’ll need to access stock exchanges outside Canada like the NASDAQ or NYSE in the US.

There are several Canadian-based brokerages that offer access to international exchanges on which cybersecurity ETFs trade including Interactive Brokers and Questrade.

Compare trading platforms

Take a look at a few trading platforms to invest in this fast-evolving industry.

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National Bank Direct Brokerage National Bank Direct Brokerage		Finder Rating: ★★★★★ 4.2 / 5	Stocks, Bonds, Options, Mutual Funds, GICs	$0	$0 if conditions met, or $100	Get $0 commission on all transactions with promo code: finder		Go to site View details	Compare	loading Fetching your data...
CIBC Investor's Edge CIBC Investor's Edge		Finder Rating: ★★★★★ 3.8 / 5	Stocks, Bonds, Options, Mutual Funds, ETFs	$4.95–$6.95	$0 if conditions met, or $100	N/A	An easy-to-use platform with access to a variety of tools to help you trade with confidence.	Go to site View details	Compare	loading Fetching your data...
Interactive Brokers Interactive Brokers Finder Award		Finder Rating: ★★★★★ 4.3 / 5	Stocks, Bonds, Options, ETFs, Currencies, Futures	min $1.00, max 0.5%	$0	N/A	Winner for Best Overall Broker in the Finder Stock Trading Platform Awards.	Go to site View details	Compare	loading Fetching your data...
Questrade Questrade		Finder Rating: ★★★★★ 4.3 / 5	Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals	$4.95 - $9.95	$0	Get $50 in free trades when you fund your account with a minimum of $1,000.	Opt for self-directed investing and save on fees or get a pre-built portfolio to take out some of the guesswork.	Go to site View details	Compare	loading Fetching your data...
Qtrade Direct Investing Qtrade Direct Investing		Finder Rating: ★★★★★ 3.7 / 5	Stocks, Bonds, Options, Mutual Funds, ETFs, GICs	$6.95 - $8.75	$0 if conditions met, otherwise $25/quarter	Get up to $150 sign-up bonus. Use promo code BONUS150. Conditions apply. Ends June 30, 2023.	Low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options.	Go to site View details	Compare	loading Fetching your data...

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Bottom line

There are risks associated with investing in cybersecurity stocks. But since the demand for these services isn’t going anywhere, cybersecurity might be a profitable long-term investment.

You’ll need a brokerage account to get started — compare a few trading platforms to invest in data protection.

Frequently asked questions

• How many cyber attacks happen every year in Canada?

  In March, 2019, around one-fifth of the businesses in Canada reported experiencing cyber security incidents. In 2018, Statistics Canada reported that 57% of internet users in Canada experienced cyber security incidents. Police forces in Canada reported around 33,000 cyber violations that same year.

• What is cyber insurance?

  Cyber insurance protects your business if your data is breached. It generally helps recover compromised data, repair computer systems and restore identities of affected users.

• How much do cyberattacks cost the US every year?

  Data breaches cost Canada approximately $6.35 million in 2020, and this number is expected to rise. According to a 2018 study by Accenture and the Ponemon Institute, businesses lost just under $4.4 million from disruptions due to cyber security problems and $5.4 million from lost information. Cyber security costs range from fixing breaches, to paying legal penalties, to implementing new protective measures.

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