Security is becoming a major part of everyday life. As the industry evolves, investors are wondering about ways to invest in security tools.
With data breaches reportedly at an all-time high, demand for security solutions is rising.
Unsurprisingly, investors are becoming increasingly interested in getting exposure to companies offering tools that provide protection from online cyber attacks, as well as physical security threats.
These security tools can include antivirus software, anti-spyware software, firewall systems and more — security tools are incredibly varied, with companies adapting quickly to cater towards the evolving technology space. So where is the best place to start?
To help investors understand the security tools market and stocks in the sector, here the Investing News Network provides a comprehensive guide on how security has evolved over the years, what security tools are and what the future outlook for the security market looks like. Read on to learn more.
Ways to invest in security tools: How security has evolved
As mentioned, the security tools landscape must evolve just as quickly as the tech sector.
Cybersecurity products, which are used to protect systems, along with their associated networks and programs, from cyber attacks, have become an important component of the security tools arena.
And their importance is likely to continue growing — the total financial cost of cybercrime incidents is tipped to reach US$5 trillion in 2024, as per a report from Juniper Research. In comparison, cybercrime incidents totaled US$445 billion in 2014 and reached US$600 billion in 2017.
The introduction of machine learning and artificial intelligence have led to major developments in the fight against cybercrime, but as Australia’s La Trobe University states, this technology had modest beginnings — early attempts to solve cyber attacks involved simply shutting down the internet.
The evolution of cybersecurity has been led partially by changes in cybercrime. The Morris Worm is described as the first widespread attack in 1988, but in recent years assaults have become bigger and more serious. For example, the infamous breach at Sony (NYSE:SNE) in 2014 pushed the tech company — and others like it — to beef up security measures.
As the need for security tools has developed, so too have cybersecurity companies. CrowdStrike Holdings (NASDAQ:CRWD) is a perfect example of a company born out of this industry trend. Founded in 2011, CrowdStrike uses advanced endpoint detection and response applications and techniques to offer machine learning-powered antivirus protection to ensure breaches are stopped before they occur.
Many companies are also introducing more futuristic measures like biometric authentication, which ranges from iris scanners to fingerprint readers.
Of course, securing physical property remains important even as online security takes a growing place in daily life. And interestingly, digital solutions are taking on increasing significance even in physical security — as Safewise notes, while there are 200 burglaries that happen in the US per hour, burglars tend to avoid homes with security cameras.
Ways to invest in security tools: The outlook for security
Cybersecurity is only one aspect of the security sector, but it’s a big one to keep in mind when considering the sector’s growth. The segment is expected to soar in magnitude as companies continue spending to safeguard their databases through various security policies to combat security risks.
Emails are said to be one of the key concerns for both consumers and organizations, as 91 percent of phishing attacks originate from emails.
But just how much potential does the cybersecurity market have? As Fortune Business Insights notes in a report, the industry size is tipped to rise from US$112.01 billion in 2019 to US$281.74 billion by 2027, growing at a compound annual growth rate (CAGR) of 12.6 percent.
The firm suggests that the sector’s growth will be propelled by the rising adoption of e-commerce online platforms and the emergence of disruptive technologies, such as the Internet of Things, AI, blockchain and big data requirements.
Outside cybersecurity, the global video surveillance market is expected to grow at a CAGR of 10.06 percent from 2020 to 2025, according to Research and Markets.
The report suggests that rising security concerns, along with the need for high-efficiency and time-saving surveillance systems at affordable costs, will act as a major growth driver for the industry.
Ways to invest in security tools: Entering the market
Growth is predicted for multiple segments of the security space, meaning that investors interested in getting exposure to this exciting industry should have plenty of opportunities.
For those new to the space, exchange-traded funds (ETFs) may be good to consider. ETFs are a popular portfolio option for new investors, or for investors who want to invest in a sector as a whole rather than choosing specific companies.
Investors can look at the following ETF investment options for cybersecurity:
- TFMG Prime Cyber Security ETF (ARCA:HACK)
- First Trust NASDAQ CEA Cybersecurity ETF (NASDAQ:CIBR)
- iShares Cybersecurity and Tech ETF (ARCA:IHAK)
- GlobalX Cybersecurity ETF (NASDAQ:BUG)
Those looking to invest in a specific company on the stock market to meet their long-term financial goals may want to consider the top cybersecurity companies as listed by Cybersecurity Ventures:
- CyberArk Software (NASDAQ:CYBR)
- A10 Networks (NYSE:ATEN)
- FireEye (NASDAQ:FEYE)
- Check Point Software Technologies (NASDAQ:CHKP)
Will you invest in security? Is there a particular vertical of security that excites you? Share your opinion in the comments below.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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