With the metaverse set to revolutionize the way individuals interact and socialize, many investors are looking for an Metaverse ETF, so they can become a part of this rapidly evolving space. The metaverse offers users an option to shape and customize their surroundings and to explore the virtual world using ‘avatars’.
This exciting concept aims to completely change the way we socialize, work, and interact with our surroundings, travel, shop, and much more. The metaverse shall cater to primarily Generation Z and Millennials, and offers brands and businesses numerous opportunities to connect and interact with their customers virtually.
Many brands have already begun taking advantage of the metaverse, such as Nike, Prada, Balenciaga, and more! Each brand is opting for its own entry strategy, as there are several ways for them to get in touch with customers.
With massive untapped potential, the metaverse very quickly began attracting investments globally. According to an online research study, approximately $10 billion was invested in the metaverse in 2021, with Epic Games securing one of the highest investments, $1 billion.
With Facebook’s announcement of changing its name to Meta, the metaverse market has gained a lot of interest worldwide. According to a report published by Grayscale, the Metaverse can potentially generate over a trillion dollars through social commerce, virtual events, hardware creation, and more!
If you’re looking for ways to invest in this exciting space, Metaverse ETFs are definitely the way to go. We shall discuss a few of the best Metaverse ETFs in detail below.
What Is A Metaverse ETF?
Metaverse ETFs are becoming more popular, as this exciting space has generated interest from numerous individuals looking to invest in these Exchange Traded Funds (ETFs). ETFs represent a basked of relevant stocks that have exposure to the Metaverse. ETF’s can be traded like regular shares but instead of investing in one company, an ETF is spread across different organizations.
Remember, these are not usually active investments. Investors usually choose to invest passively, keeping long-term gains in mind.
To put it simply, Metaverse ETFs give investors exposure to the growing Metaverse market whilst minimizing risks by diversifying investments. However, since there are a lot of unknowns within this space, only individuals looking for high-risk or moderate-risk investments should seek to invest in Metaverse ETFs.
Why Are Metaverse ETFs Important?
According to a Bloomberg report, ETF assets have amassed as much as $2.2 billion as of Dec 2021. They also estimate that by the year 2024, Metaverse ETFs could be worth up to $80 billion based on current trends. As the metaverse expands to include more stakeholders such as gaming platforms, headset manufacturers and more, Metaverse ETFs are on the trajectory to grow their portfolio rapidly.
These ETFs provide access to an evolving technology sector. Because the Metaverse is still relatively new, there are a lot of things that investors have to take into consideration. Information on metaverse companies is still not widely accessible and manually locating and purchasing shares of Metaverse companies can be extremely time-consuming; simply buying a metaverse ETF may be a seamless process comparatively.
The only challenge for Metaverse ETF investors is that since the metaverse is in its infancy, it can be difficult to predict how popular a specific project could be or if it would be released soon. Options for Metaverse ETFs are limited at the moment, due to the SEC’s slow acceptance of emerging technologies. At the start of 2022, the SEC rejected a Bitcoin ETF proposal, submitted by Fidelity Wise.
Metaverse ETFs were first launched in June, 2021. The first Metaverse ETF corresponds to the Ball Metaverse Index, which tracks the Metaverse Market to list companies according to their performance. The first Metaverse ETF had over $863 million in assets, and is called ‘Roundhill Ball Metaverse ETF’.
The Ball Metaverse Index tracks the overall performance of most major companies working in the Metaverse space. This includes gaming companies such as the Sandbox, Meta, or Roblox or companies that offer products/services within the Metaverse, such as Adidas, Prada, Nike, and more.
9 Best Metaverse ETFs
This Metaverse ETF tracks the performance of returns from S&P’s own Software and Services Index. It is important to understand that this only encompasses a segment of the Total Market Index. The most recent update of XSW holdings was around February 2022, where the total assets added up to a total of $327 million.
(CTXS) Citrix Systems makes up a big part of XSW and offers cloud computing services that are aiming to assist game development platforms in entering the metaverse. One of their other primary company holdings includes ZNGA (Zynga Inc.), a well-renowned game development company that is based in California.
Zynga Inc. aims to develop metaverse-based games that allow users to fully immerse themselves within the gameplay. By developing interactive games with their own in-built economy, Zynga Inc aims to contribute to the rising popularity of Blockchain based games.
Other prominent names include Activision Blizzard and Riot Blockchain with the former making incredible games set to be launched in the Metaverse and the latter mining bitcoin and contributing to the crypto/metaverse space immensely.
This popular Metaverse ETF works within the FinTech (Financial Technology) sector to work with established industries such as fundraising, lending, and insurance. With an interest in technology, the diversified FINX ETF focuses primarily on technology as compared to the financial side of things (i.e. 78% Technology-based Holdings as compared to 14% Financial holdings).
This Metaverse ETF works with innovative digital payment-based companies such as ‘Block, Inc’. Block Inc’s projects include Square and Cash App and the company has committed itself towards facilitating Bitcoin’s transition across the internet.
Investment companies such as ARK Investment held over $1.4 billion in shares of Block, Inc. This showcases how FINX is a good choice for individuals looking to invest in Metaverse ETFs.
This Metaverse ETF’s aim is to incorporate a portfolio that produces much better results than the Nasdaq 100 Index average. Their primary area of investment is the Communication and IT sectors. With an average market cap of $217 billion with 802,754 market shares, these Metaverse ETFs boast large tech companies such as AAPL (Apple Inc.). AAPL provides a wide variety of electronic products and other software etc.
However, the reason for TQQQ’s interest in AAPL is because of AAPL’s goals for the metaverse. The company aims to utilize AR (Augmented Reality) to develop applications and hardware such as smart glasses and headsets. This would assist in making the entire metaverse experience more immersive and with Apple’s branding behind these headsets, the hardware could be an instant hit! AAPL has been a long-time favorite for tech savvy investors because share prices have risen the past few years.
VGT is a very popular Metaverse ETF that most investors use to passively managed funds. The ETF replicates the IT Spliced Index and offers a wide portfolio of tech-based holdings, the biggest of which is ‘MSFT’ (Microsoft Corporation).
Microsoft recently has made several acquisitions in the gaming space, grabbing up intellectual rights to games such as Candy Crush, Call of Duty, Overwatch, World of Warcraft and more! Some of these games are being worked on to incorporate into the metaverse, which makes the VGT Metaverse ETF an extremely attractive choice for potential investors.
The largest amount of MSFT shares was held by Fisher Investments with around $7 billion spread across approximately 25 million shares.
This popular Metaverse ETF was the first to step into the Metaverse ETF space and includes an impressive list of holdings such as NVIDIA, Meta, Roblox, and Microsoft. The ETF’s primary list of holdings includes tech and VR-related companies. Domiciled in Ireland, the find reinvests all dividends to hold for long-term gain.
With exciting platforms such as Meta, Roblox, and more as part of their holdings, this Metaverse ETF is highly sought after by aspiring investors. Roblox offers an extremely immersive experience to its users and popular brands such as Nike have decided to build their own metaverse within the platform.
This Metaverse ETF offers investors the opportunity of connecting with the leading metaverse tech companies around the world. Due to its first mover advantage, it is one of the first choices for any metaverse ETF investor.
This Metaverse ETF utilizes the MSCI IT Index to track the performance of IT companies in the U.S. equity market. Although FTEC does not offer an extensive portfolio as compared to its competitors, it comprises major technology companies such as NVIDIA Corporation which are contributing largely to the metaverse space.
NVIDIA itself is a very attractive investment opportunity for investors as it is involved in multiple metaverse-related projects.
The Metaverse ETF consists of 368 securities within the IT and communications space. The companies that they partner with are fully immersed within the Metaverse space. Companies such as NVIDIA are also working within the NFT space to provide fully designed infrastructure to improve the metaverse. GQG Partners was a big investor in NVIDIA with over $3 billion spread across 15 million shares.
This actively managed Metaverse ETF allows investors to get access to tech-related global securities that are involved within the Metaverse. This includes both products and services, as the Metaverse provides vast potential for investors to earn through Metaverse ETFs.
This ETF primarily focuses on investing in emerging technologies that contribute toward the next generation of the internet, i.e. the Metaverse. With large tech companies such as Meta listed as one of the securities within the ETF, investors can easily visualize the large potential that their portfolio offers.
The Submbersive Metaverse ETF uses 7 parameters to identify companies working on the metaverse. The parameters include Creator Economy, Spatial Computing, Decentralization, Experience, Infrastructure, and Human Interface. For example, companies that are currently working to build structures within the metaverse through 3D modeling are of great interest to this ETF. Investors will easily be able to find the top-ranking metaverse companies with this ETF portfolio.
With a view of investing in creating virtual economies where artists and other creators can get paid for their creations, as well as removing third parties and allowing seamless P2P transactions through decentralization, this ETF is certainly an excellent choice to get lucrative long-term returns.
VERS utilizes the ‘Solactive Metaverse Theme Index’ to actively track high-performing securities to offer options to various investors. There are certain conditions that companies need to fulfill in order to be indexed. For example, 50% of the revenue generated by the company should be through metaverse-related activities. This is done to ensure that investors get access to companies who are currently solely focusing on the metaverse and what it has to offer.
The index scans public records to identify high-performing metaverse companies and allots a score that reflects their business’s correlation to the metaverse. Then, on the basis of those scores, VERS ranks each business according to certain requirements (minimum turnover etc.)
The index also allots higher ‘weights’ to large tech companies with higher scores, up to a maximum of 4.5%. Thus, as the investment is spread out amongst the large list of securities, the investment remains relatively secure. However, as is the case with any other investment there are also risks involved.
This Metaverse ETF provides access to companies working within the Metaverse that have the potential to provide incredible returns. With the metaverse poised to revolutionize how individuals interact globally, this Metaverse ETF focuses on ranking securities based on their revenue generated from Metaverse-related activities.
The ETF also provides a lot of informational blogs to educate new investors on how to venture into the Metaverse ETF space. With net assets worth $3.82 million, the ETF offers to connect investors to various high-ranking tech companies.
How To Choose The Right Metaverse ETF For You
With so many choices for Metaverse ETFs, investors may find it difficult to shortlist which ones to invest into. Here are some of the things that investors should consider before selecting a Metaverse ETF:
- Listed Securities: Each ETF offers its own list of securities to invest in, therefore investors should first explore what securities are listed. For safer investments, investors should be on the lookout for major companies such as Meta, Apple, NVIDIA, Roblox, and more.#
- Liquidity: Understanding liquidity involves looking into two aspects, i.e. the liquidity of individual securities and the daily traded units (volume). Investors can analyze these two in more detail to fully understand if a Metaverse ETF is worth investing in. For example, if you invest in securities that are up and coming, you need to understand that these are long-term investments as trading them would be difficult.
- ETF Focus: It is extremely important for investors to understand the niche they’re investing in. If an investor is not familiar with the Fintech Industry, investing in a Fintech-based Metaverse ETF such as FINX (Global X Fintech ETF) would not be recommended.
- Fees: Different ETF funds come with different fees, which is why it is recommended to compare the fees for exchange traded funds before you select one to invest in. While this may not seem like an important factor to consider, fees can have a major impact on your profitability. This is because they can compound over time, thus impacting your Net Asset Value (NAV). Another thing investors need to be on the lookout for is the management expense ratio. The lower the ratio, the better your returns.
Conclusion
With the metaverse set to revolutionize the way we live our day-to-day lives, the potential for investment is significant.For example, the type of companies that are working in the metaverse range from game developers to bitcoin miners, hardware developers, and even 3D model designers.
While investing in Metaverse ETFs, it is also important to remember that there are a lot of unknowns in this space. What seems to be working today, might not be acceptable tomorrow. Thus each investment comes with a moderate to high risk. We highly recommend reviewing the Metaverse ETFs listed in this article, to see which one offers the best portfolio, liquidity, bid/ask ratios, and more! Remember, this article does not provide financial advice, please conduct your own research before deciding to invest.
Investing in spaces such as hardware development may be an excellent choice. For example, Meta is currently working on a robotic skin to enhance how customers experience the metaverse. Combining VR headsets with AR apps can help customers try on clothes etc. virtually before they make a purchase. The possibilities are endless!
This post from Metaverse Insider aims to give information and provide access to information to investors to help them make their own decisions and is not meant to be interpreted as investment advice.
