This thematic ETF tracks the Cyber Security Select Index and holds hardware, software, and services companies that provide cybersecurity solutions. It centers on US-listed companies but also includes some overseas firms.

It suits investors who want long-term exposure to the growth of the cybersecurity industry and prefer thematic diversification to picking individual stocks.

Launched in 2014 by Amplify Investments, it is a passively managed (index-tracking) ETF.

The fund holds cybersecurity solution providers on a market-cap-weighted basis, with about 25 holdings spread across niches such as cloud security, network defense, identity authentication, and government cyber defense. The combined weight of the top holdings exceeds half of the portfolio, giving it a portfolio concentrated in core cybersecurity companies.

• A concentrated portfolio specialized in cybersecurity
• Broad inclusion criteria that extend to government and defense cyber defense companies

Assets under management (AUM) stand at $3.8B, and the expense ratio is 0.60% per year.

Compared with similar cybersecurity ETFs, it holds relatively few stocks, so concentration in core companies is high. Its expense ratio is somewhat above the category average, so the cumulative impact of costs should be considered for long-term holding.

The cybersecurity sector has maintained a solid base of long-term demand, driven by rising threats such as ransomware and supply chain attacks and by the accelerating shift to the cloud. Valuation adjustments in growth stocks caused by changes in the interest rate environment tend to act as a source of short-term volatility.

Cybersecurity is rising in priority within corporate and government IT budgets, which keeps the base of long-term fund inflows stable. A pattern is also observed in which investor attention concentrates on the sector as a whole when geopolitical tensions flare or a major security incident occurs.

Its strength is the ability to invest in a concentrated group of core cybersecurity companies, while its weaknesses are the volatility that comes with thematic concentration and a somewhat high expense ratio.

IBB, AIPO, POWR, and ELFY shown in the table are ETFs representing themes other than cybersecurity, and serve as reference points for comparing thematic concentrated investing. Among direct cybersecurity substitutes, Fidelity's CIBR has a cost advantage, iShares' IHAK includes global companies, and BUG pursues global diversification. If lowering costs is the priority, CIBR is worth considering, and if you want global diversification, you can review IHAK or BUG as well.

Here are the points to check before investing in HACK. Along with the growth potential of the cybersecurity theme, it is important to look at the volatility that comes with a concentrated portfolio, the expense level, and valuation risk.

Because of its concentration in the cybersecurity sector, a broad sector pullback can lead to larger short-term drawdowns than broad index ETFs. Growth stock valuation swings and single-stock risk are also major risk factors.

It is a valid option for those who want thematic exposure to the growth of the cybersecurity industry. If cost savings are the priority, it is reasonable to also consider CIBR, and if you want global diversification, IHAK.