ETFs are growing! Here’s a star fund for Stocks and Shares ISA investors to consider

Investing in exchange traded funds (ETFs) can be a great way to diversify your Shares and Shares ISA in a cost-effective way.

Investing in one of these financial instruments has been particularly profitable over the past 12 months. According to a Bloomberg Intelligence analysis, 96% of US ETFs posted positive returns during this period, with many products delivering double-digit returns.

Bloomberg notes: “If you’ve invested in an exchange-traded fund – those cheap products made for the masses – you’re likely to enjoy stellar returns, no matter what you’ve been betting on.“.

Strong players

It’s not just US currencies that have been performing strongly in the past year. A number of London-listed ETFs that I have bought for my portfolio have delivered healthy returns.

I Xtrackers MSCI World Momentum ETFfor example, it increased by one third from November 2023. And HSBC S&P 500 ETF‘up 28%, boosted by a bull run in US stocks.

UK-focused funds have also performed heroically in recent times. I iShares Core FTSE 100 ETFup 15% from last November.

Past performance is no guarantee of future returns. And predicting how stocks and funds will perform in the near term in the current geopolitical and macroeconomic landscape is very difficult.

But this doesn’t mean I’m not looking for more ETFs to buy. This is because I invest with a long-term perspective. I IL&G Cyber ​​Security ETF‘s (LSE:ISPY) fund I think ISA investors like myself should pay close attention to.

IL&G Cyber ​​Security ETF

This fund – managed by Legal & General – has increased in value since its launch in 2015. It is up 24% in the last 12 months alone.

The broader technology sector has been energized by the buzz surrounding artificial intelligence (AI) over the past year. The fund, meanwhile, has helped predict that the development of AI will create new opportunities for hackers and other cybercriminals.

Fortune Business Insights analysts estimate that the global cybersecurity market will be worth $562.7bn by 2032. That represents compound annual growth of 14.2% from today’s levels.

Investing in this L&G cybersecurity ETF can be an effective way to capitalize on this growing market. It has shares in more than 30 industry players incl Cloudflare, Crowdstrike, Palo Altoagain Cisco Systems.

Operational problems (such as system failures and competitive pressures) can affect the performance of these companies. But by investing in a basket of these cyber companies, the impact can be minimal.

The broader threat is that 90% of the fund’s income is reported in US dollars. There may be more risk to movements in the greenback than ETFs with a broader currency.

However, I still expect the fund to continue to deliver good long-term returns.