1 top-notch ETF I plan to own in my ISA for the next 10 years

Our writer highlights a thematic ETF that he plans to hold in his Stocks and Shares ISA portfolio for many more years to come.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Hand is turning a dice and changes the direction of an arrow symbolizing that the value of an ETF (Exchange Traded Fund) is going up (or vice versa)

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A great way to diversify an ISA is through exchange-traded funds. The benefit of these is that I can own a slice of many different firms through a single investment. I find that an attractive proposition.

Having said that, I only own a couple of ETFs because I prefer to pick individual stocks. But one of them is L&G Cyber Security UCITS ETF (LSE: ISPY), which is a fund that I intend to hold long term. Here’s why.

A vital industry

They say nobody can predict the future with certainty, which is true. However, I do think certain trends are almost inevitable and it can pay for investors to get some portfolio exposure to them.

For example, it seems clear to me that digital transactions will continue growing at the expense of cash. That’s why I hold shares of Visa, Mastercard and MercadoLibre.

Cloud computing is another, along with e-commerce and artificial intelligence (AI). And I’d put cybersecurity right up there too, as hardly a day goes by now without a new major hacking incident.

On 17 June, for instance, it was reported that cybercriminals who hacked customers of cloud data-storage firm Snowflake demanded payments of between $300k and $5m from each company.

Meanwhile, NHS Dumfries and Galloway recently told people in the region that their data is likely to have been published online following an “extremely serious” hack.

I expect cloud platforms, companies, governments and organisations like the NHS to spend more on cybersecurity as time goes on.

An AI arms race

Today, hackers are also increasingly using AI to develop malware and launch sophisticated attacks. So an AI arms race is emerging, where both attackers and defenders use AI to gain an advantage.

We’re seeing an explosion of new threat actors that…can use generative AI to advance their attacks very quickly and to make them scalable. There’s going to be a greater proliferation of adversaries than we’ve ever seen. And that is just going to grow, probably exponentially.

George Kurtz, CEO of Crowdstrike

The ETF

The L&G Cyber Security ETF aims to track the performance of the ISE Cyber Security UCITS Index. It held 39 different cybersecurity-related stocks as of 31 May.

Top 10 holdings

Portfolio weighting (%)
Darktrace7.3%
Gen Digital6.0%
Palo Alto Networks5.8%
Broadcom5.6%
CrowdStrike5.5%
Cisco Systems5.2%
Check Point Software Technologies5.0%
Ziff Davis4.9%
Fortinet4.9%
Akamai Technologies4.8%

There are some top-class companies in there, notably Palo Alto Networks, Broadcom, Fortinet and CrowdStrike.

Now, one thing to note here is that the ETF carries a 0.69% ongoing charge, which can eat into returns over the long run. This is something I can stomach when the performance is strong — the share price is up around 200% in less than 10 years — but it’s something to keep an eye on.

Another issue is that some of these stocks are currently trading at very high multiples. CrowdStrike, for example, has a forward price-to-earnings ratio of 92! So valuations might be a little stretched across parts of the industry lately.

However, I remain very bullish long term, especially looking at some of the industry forecasts. Bloomberg Intelligence, for example, sees generative AI cybersecurity spend growing from just $9m in 2022 (when ChatGPT came out) to $14bn by 2032.

That’s a 108% compound annual growth rate!

I intend to hold this ETF over the long term as the world increasingly relies on technology, making cybersecurity a must-have.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ben McPoland has positions in CrowdStrike, Legal & General Ucits ETF Plc - L&g Cyber Security Ucits ETF, Mastercard, MercadoLibre, and Visa. The Motley Fool UK has recommended CrowdStrike, Fortinet, Mastercard, MercadoLibre, Palo Alto Networks, Snowflake, and Visa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »