Investor Education
What is an ETF?
What is an ETF?
In 1989, the idea for the exchange-traded fund (ETF) was born.
Initially marketed to investors as Index Participation Shares, this innovative new product was meant to be a proxy for the S&P 500 that also traded on an exchange like a stock. After being launched, this early ETF prototype was immediately targeted by lawyers of the Chicago Mercantile Exchange (CME) for illegally behaving like a futures contract. A lawsuit ensued, and a federal judge in Chicago ruled that they needed to be withdrawn.
A year later, the case can be made that Canada was the birthplace of the first successful ETF. This time the product was called Toronto 35 Index Participation Units (TIPs 35), and it tracked the TSE-35 Index at the time. TIPs were instantly lauded for providing low-cost exposure to Canadian equities – and shortly after, many more ETFs in Canada and the United States would follow suit, including the SPDR S&P 500 Trust ETF in 1993.
How do ETFs work?
Today’s infographic from StocksToTrade.com highlights the basics around ETFs, including how they work, what type of assets they can track, and the pros and cons associated with investing in them.
In the most basic sense, an ETF is a type of fund that owns assets – like stocks, commodities, or futures – but has its ownership divided into shares that trade on stock exchanges.
In other words, investors can buy and sell ETFs whenever they want during trading hours. Like a stock, each ETF has a ticker symbol and a price that changes in real-time. However, unlike a stock, the number of shares outstanding can change daily based on the share creation and redemption mechanisms.
Pros and Cons
There are many views out there on ETFs, but it is generally accepted that they provide an inexpensive, transparent, and convenient way to get access to many different asset classes. This makes it easy to diversify a portfolio, and it also makes ETFs simple to buy and sell.
For these reasons, the passive management investment industry has taken off, and the ETF industry now has over $4 trillion of assets under management (AUM) globally. By the year 2021, ETFs are expected to surpass the $7 trillion mark for AUM.
Despite this growth and a wide range of benefits, ETFs do have some detractors.
Critics would be quick to point out that some ETFs are very thinly traded, providing wide bid/ask spreads and lower liquidity. Furthermore, there can also be instances where technical issues can cause a performance gap between the ETF and the index it tracks, known as tracking error.
As a final point, it’s worth mentioning that there is some counterparty risk with ETFs – for example, even if you “own” physically-backed gold through the SPDR Gold Trust (GLD), there is a chance that in extreme situations that you may not actually get to see the benefit of that gold. The counterparty risk stems from the possibility of a party failing to deliver on their promises, and is actually quite common to see with other types of assets, as well.
Technology
Thematic Investing: 3 Key Trends in Cybersecurity
Cyberattacks are becoming more frequent and sophisticated. Here’s what investors need to know about the future of cybersecurity.


Thematic Investing: 3 Key Trends in Cybersecurity
In 2020, the global cost of cybercrime was estimated to be around $945 billion, according to McAfee.
It’s likely even higher today, as multiple sources have recorded an increase in the frequency and sophistication of cyberattacks during the pandemic.
In this infographic from Global X ETFs, we highlight three major trends that are shaping the future of the cybersecurity industry that investors need to know.
Trend 1: Increasing Costs
Research from IBM determined that the average data breach cost businesses $4.2 million in 2021, up from $3.6 million in 2017. The following table breaks this figure into four components:
Cost Component | Value ($) |
---|---|
Cost of lost business | $1.6M |
Detection and escalation | $1.2M |
Post breach response | $1.1M |
Notification | $0.3M |
Total | $4.2M |
The greatest cost of a data breach is lost business, which results from system downtimes, reputational losses, and lost customers. Second is detection and escalation, including investigative activities, audit services, and communications to stakeholders.
Post breach response includes costs such as legal expenditures, issuing new accounts or credit cards (in the case of financial institutions), and other monitoring services. Lastly, notification refers to the cost of notifying regulators, stakeholders, and other third parties.
To stay ahead of these rising costs, businesses are placing more emphasis on cybersecurity. For example, Microsoft announced in September 2021 that it would quadruple its cybersecurity investments to $20 billion over the next five years.
Trend 2: Remote Work Opens New Vulnerabilities
According to IBM, companies that rely more on remote work experience greater losses from data breaches. For companies where 81 to 100% of employees were remote, the average cost of a data breach was $5.5 million (2021). This dropped to $3.7 million for companies that had under 10% of employees working from home.
A major reason for this gap is that work-from-home setups are typically less secure. Phishing attacks surged in 2021, taking advantage of the fact that many employees access corporate systems through their personal devices.
Type of Attack | Number of attacks in 2020 | Number of attacks in 2021 | Growth (%) |
---|---|---|---|
Spam phishing | 1.5M | 10.1M | +573% |
Credential phishing | 5.5M | 6.2M | +13% |
As detected by Trend Micro’s Cloud App Security.
Spam phishing refers to “fake” emails that trick users by impersonating company management. They can include malicious links that download ransomware onto the users device. Credential phishing is similar in concept, though the goal is to steal a person’s account credentials.
A tactic you may have seen before is the Amazon scam, where senders impersonate Amazon and convince users to update their payment methods. This strategy could also be used to gain access to a company’s internal systems.
Trend 3: AI Can Reduce the Cost of a Data Breach
AI-based cybersecurity can detect and respond to cyberattacks without any human intervention. When fully deployed, IBM measured a 20% reduction in the time it takes to identify and contain a breach. It also resulted in cost savings upwards of 60%.
A prominent user of AI-based cybersecurity is Google, which uses machine learning to detect phishing attacks within Gmail.
Machine learning helps Gmail block spam and phishing messages from showing up in your inbox with over 99.9% accuracy. This is huge, given that 50-70% of messages that Gmail receives are spam.
– Andy Wen, Google
As cybercrime escalates, Acumen Research and Consulting believes the market for AI-based security solutions will reach $134 billion by 2030, up from $15 billion in 2021.
Introducing the Global X Cybersecurity ETF
The Global X Cybersecurity ETF (Ticker: BUG) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Cybersecurity Index. See below for industry and country-level breakdowns, as of June 2022.
Sector (By security type) | Weight |
---|---|
Cloud | 28.0% |
Network | 25.1% |
Identity | 17.7% |
Internet | 15.0% |
Endpoint | 12.8% |
Country | Weight |
---|---|
🇺🇸 U.S. | 71.6% |
🇮🇱 Israel | 13.2% |
🇬🇧 UK | 8.2% |
🇯🇵 Japan | 5.5% |
🇰🇷 South Korea | 0.9% |
🇨🇦 Canada | 0.6% |
Totals may not equal 100% due to rounding.
Investors can use this passively managed solution to gain exposure to the rising adoption of cybersecurity technologies.

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