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Picture a day in your tech-savvy life. Perhaps you go for a run in the morning while using your smartphone to track your heart rate. On the way to work, you buy a cup of coffee using a payment app. Later in the day, you use your bank’s app to make an online transfer of funds. Late afternoon, you might make a trade in your brokerage account using your computer. And, finally, at the end of the day, you use a taxi-hailing service to get home quick. Technology has made life so easy, hasn’t it? But rarely do we stop and ponder the potential downsides.

The Rise of Cybersecurity

What if a criminal could access all your data? What if they stole your health and financial information? In the wrong hands, it would be nothing short of a disaster. That’s why cybersecurity is so important: It enables us to benefit from technology, protecting us from criminals.

Companies take a lot of precautions to ensure your data remains intact, but breaches do happen. Our favourite apps access and store tons of personal information, including banking logins and GPS location. Between malware, adware, phishing scams and outright hacking, our privacy is at stake. Even companies such as Target and Sony Pictures have seen hackers break their systems.

Now I’m not implying we should all dump our smartphones and tablets, shun new technology and go back to the Stone Age. I’m just highlighting the myriad of challenges – and at times, unintended consequences – that come with new technologies. Cybersecurity has a much larger implication for corporations and governments. Organizations must protect trade secrets, intellectual property, customer data and private financial records. For governments, leaks and hacks can even put national security at risk.

Investment Opportunities in Cybersecurity Companies

These tailwinds are poised to provide long-term structural growth for cybersecurity companies. The number of devices in use, technology adoption rates and the number of Internet of Things (IoT) offerings will only increase. With this growth, we will need better and more robust security solutions. The cybersecurity market is currently estimated to be worth US$75 billion, while more than 80 million cyber attacks happen every year (and many more go undetected). Retail and financial services, unsurprisingly, are among the top affected industries. According to estimates by Cisco and NTCA, the number of IoT connected devices is expected to grow from 18 billion currently to 50 billion by 2020. So you can imagine the number of potential vulnerabilities this will create for hackers.

In all likelihood, the eventual standard-bearer in the cybersecurity space is still a start-up today. Given the rapidly changing landscape, the most innovative companies with bleeding-edge technology will have an advantage. We are familiar with Experian (EXPN-LN) as a company collecting personal credit data. But they also provide data breach solutions, a cybersecurity sub-industry with healthy tailwinds. Cisco (CSCO-US) also provides network and content security solutions via Sourcefire (an entity acquired in 2013). FireEye (FEYE-US), another cybersecurity firm, made waves after helping Home Depot and Sony Pictures recover from data breaches last year.

Cybersecurity is an emerging theme that will only grow in importance with time. There are quite a few promising investment opportunities here. Refer to Fortune's article 12 October 2016: Here's How Much Businesses Worldwide Will Spend on Cybersecurity by 2020

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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