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Sep 19

Is it time to invest in the metaverse?

Reading Time: 5 mins

The metaverse is a new type of digital space. Often described as the ‘third generation of the internet’, the metaverse has the potential to change the way we educate, socialise, and entertain ourselves online.

If you’re the type of investor attracted to emerging sectors, you may be keen to put your faith in the metaverse. But how on earth can you invest in a fictional universe?

In this article we give the lowdown on what the metaverse actually is, and explain how you can invest in it. Keep on reading for all of the details or click a link to head straight to a section…

what is the metaverse?

The ‘metaverse’ is a digital, virtual space that can facilitate interactions with millions of users. The metaverse might be used for entertainment, gaming, education, social interactions, and even business meetings. It can also be used to buy and sell virtual items, including property!

When you think of the metaverse, a VR headset may be the first thing that comes to mind. That’s because it’s one of the easiest ways to experience losing your senses in a digital world. Yet it’s important to note that VR headsets are just a small part of the metaverse.

Importantly, the metaverse can encompass any sort of digital, fictional universe. So if you don’t have a VR headset, you can still experience the metaverse through a normal PC, tablet, or smartphone.

Fortnite and Minecraft are two very popular online games that cleverly utilise the metaverse. Both apps enable gamers to interact with millions of other players. They also give users the option to purchase virtual items.

Augmented reality (AR) is also considered part of metaverse. AR refers to apps that utilise real-world information, in-real time.

Have you ever put virtual glasses on yourself, or a friend, on Snapchat? Perhaps you’ve translated a foreign menu into English through Google Lens? If so, you’ve already experienced the joys of AR.

THE ‘FINAL EVOLUTION OF THE INTERNET’

According to unherd.com, the metaverse can be described as the “final evolution of the internet, where the borders between the real world and the digital dissolve.”

To put it another way, the metaverse is often referred to as ‘Web 3.0’ – or the ‘third generation’ of the internet. Confused? Think of it this way:

  • The original ‘world wide web’ was known as Web 1.0.
  • Web 2.0 followed the introduction of social media
  • Web 3.0 is commonly referred to as the metaverse. It’s where real and digital worlds combine.

buying virtual land in the metaverse

If you’re confident the world is set to adopt the metaverse with open arms, you may be interested in investing in the sector. One way to do this is to buy ‘virtual land’ through an online platform.

Buying virtual land refers to the practise of purchasing online space that can used to host virtual homes, retail, or commercial spaces.  The idea is that this land (hopefully) increases in value as more people use a particular game, and/or buy into the idea of owning virtual items. Sandbox and Decentraland are two such platforms where this is possible. 

While buying land that doesn’t exist in the real world may seem extraordinary, it’s worth knowing that some investment firms have already added virtual property to their portfolios.

So too has Jim Osman, owner of consultancy firm, The Edge. Speaking to MoneyMagpie he explained his decision to put his faith in the digital universe: “Ultimately this is a separate world, where people will hold meetings, holiday, and have full on entertainment without physically going anywhere. I have recently bought virtual land for building purposes.”

How can you invest in the metaverse?

If owning virtual property isn’t for you, you’ll be pleased to know there are more traditional ways to invest in the metaverse.

Buying an exchange-traded fund (ETF) is another way to gain exposure to the metaverse sector – a sentiment echoed by virtual property-owning Jim Osman.

He explains: “I have been waiting for an opportunity and invested heavily in an ETF on the recent pullback that gives good exposure to Metaverse stocks. The ticker is META*. It contains stocks like Nvidia, Facebook and Microsoft and is currently higher by 10%.”

While there’s no way of knowing how any particular ETF will perform in future, there are now an abundance of metaverse ETFs that concentrate on virtual worlds. Here are three popular ones:

  • ProShares Metaverse ETF
  • Global X Metaverse ETF
  • Roundhill Ball Metaverse ETF

To learn more about ETFs and how they work, take a look at our step-by-step guide to exchange-traded funds.

YOU CAN INVEST DIRECTLY IN METAVERSE STOCKS TOO…

While buying a specialist ETF is arguably the easiest way to gain exposure to the metaverse sector, investing directly in companies with a significant interest in the digital universe is another option.

While we can’t list them all, here are three companies that have a significant interest in the metaverse.

  • Meta. Formerly known as Facebook, the world’s largest social media company is a keen proponent of the metaverse. Having already founded the popular Oculus VR headset, the company is reportedly investing a cool $10 in the digital universe.
  • Unity Software. San Fransisco-based Unity Software is a major developer of video game platforms and is often the choice of many content creators. The company has a huge interest in success of the metaverse.
  • Roblox Corporation. Roblox is a video game developer. The company runs numerous 3D virtual worlds, and the platform has enjoyed significant growth over the past few years.

To learn more about investing in individual companies take a look at our article that explains how to buy shares.

What are the risks?

When it comes to investing in new sectors, such as the metaverse, it’s important to understand the risks involved.

According to Jim Osman, investing in the metaverse is ‘high risk.’ He explains: “It’s still incredibly early and like any early adoption of anything, the risk is it may fail, so this is a high-risk investment but will reward highly when it comes to fruition.”

Osman continues: “Investors have a natural tendency to think about upside when they invest. I think about the risk first. Most people can pick an investment. What usually gets them is the timing. Never invest more that you are prepared to lose and always think of your downside first. Start small and leave yourself some room. There is no worse feeling than going full gung-ho into a stock, only to see it fall. Your emotion seeing losses will force you out.”

As with any investing, remember that the value of your portfolio can rise and fall. Past performance should never be used as an indicator of future performance.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. 

*The Roundhill Ball Metaverse ETF changed its ticker from ‘META’ to ‘METV’ in January 2022.

This is not financial or investment advice. Remember to do your own research and speak to a professional advisor before parting with any money.

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