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Metaverse stocks are emerging as an investment option that bets on the growing popularity of the virtual, online world. While getting in on the ground floor of an investment opportunity can pay off, whether you should invest in metaverse companies depends on a few factors—not least of all your tolerance for risk.
The metaverse refers to a combination of technologies that create a shared online space based in virtual reality. Many tech and finance experts are optimistic about the growth potential of metaverse companies, which may focus on gaming platforms, virtual reality products, back-end technologies or other areas. Before you begin investing in metaverse stocks, take time to learn more about the companies involved, which stocks you may want to invest in and how to buy metaverse stocks.
What Are Metaverse Stocks?
As demand for virtual reality experiences grows, some experts predict the metaverse will continue to expand and become part of our everyday lives. Metaverse stocks provide investors with an opportunity to purchase part ownership in a metaverse company.
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No one knows for sure which metaverse platforms will take off. Metaverse optimists predict the metaverse will grow into a fully immersive alternate reality in which users can work, socialize, shop and spend much of their time in this virtual dimension.
Facebook changed its name to Meta in 2021 and brought metaverse investing into the mainstream when it announced it was investing $10 billion to build its metaverse. But before Meta, the Roblox gaming corporation released its immersive cyber world back in 2016. By the end of 2021, Roblox had become a go-to metaverse platform, boasting nearly 50 million daily players.
Beyond gaming and social media platforms, metaverse investors can also purchase stocks of software, 3D design and tech companies involved in the metaverse. For example, the software company Unity is a popular metaverse investment because some predict that Unity's immersive 3D gaming engines may power the metaverse. Software companies Autodesk and Nvidia are also popular metaverse stocks. Experts predict their computing and design tools, which developers use to design 3D worlds, could help build the infrastructure of the metaverse.
Metaverse skeptics believe that the metaverse is a buzzword, gimmick or passing marketing and branding trend. Whether you believe the metaverse is here to stay or a passing fad will play a large part in your desire to put your money into one or more of these stocks.
Pros and Cons of Metaverse Stocks
Like any stock, metaverse stocks can be a promising way to invest in a sector or company you believe has strong growth potential. But there are downsides to investing in metaverse stocks, too, like exposure to risk and a time-intensive research and buying process. Here's what you need to know before you buy metaverse stocks.
- Exciting possibilities: Investors who want to get in on new tech may find metaverse stocks thrilling. While all stock investing carries risk, and it's impossible to predict a stock's future gain or loss, Bloomberg analysts estimate that the metaverse will grow to be worth nearly $800 billion by 2024, up from their $478.7 billion 2020 valuation.
- Affordable options: You can buy fractional shares of some major metaverse stocks through a brokerage, so you can buy in for a small amount of money.
- Wide range of companies: Many companies involved in the metaverse—such as Amazon and Microsoft—are already known as leaders in other areas of technology and have track records of pulling off large, successful tech product development. If your investing budget can't afford those big-name companies, you can put your money into less expensive up-and-comers instead.
- Loss potential: Investing in any stock carries a substantial level of risk, but metaverse stocks can be even riskier, as the metaverse is still in development and a metaverse company's value can rise or fall unpredictably. If you funnel a large amount of money into a single tech company's stock, you could lose your money.
- Time intensive: While investing in individual stocks should always involve substantial upfront research, investing in cutting-edge, speculative tech like the metaverse and cryptocurrency requires even more time and analysis. As an alternative to researching and picking individual metaverse stocks, consider buying shares in diversified metaverse funds. For example, Roundhill Ball Metaverse ETF (METV) is a passively managed exchange-traded fund whose holdings include the major companies Nvidia, Roblox, Microsoft, Unity, Amazon and Autodesk.
- Uncertain future laws: Blockchain technology and cryptocurrency are predicted to be the foundation of the metaverse's digital economy, where users will trade digital currencies and assets like virtual land. Blockchain is a shared, secure and traceable ledger that uses data to assign unique values to intangible assets. Because blockchain is a relatively new technology, the Securities and Exchange Commission is still grappling with how to regulate blockchain-based investments. Metaverse investing exposes you to some of the same risk as the currencies it's being built on because increased regulations could foreseeably lower investor and user interest.
How to Buy Metaverse Stocks
Like other stocks, an investor can buy metaverse stocks through a brokerage. If you're new to investing, a financial advisor can help you navigate choosing investments and executing trades.
The steps you'll take to invest in metaverse stocks are, for the most part, the same as the steps for investing in other types of stocks:
1. Conduct Research
One smart rule of thumb for investing safely and successfully is to become well-informed about an asset before you buy and never invest in something you don't fully understand.
When you settle on a specific metaverse stock you'd like to purchase, spend time reading about the company's earnings, revenue growth, product offerings and future earnings forecast.
2. Log In to a Brokerage Account
You'll need to have a brokerage account to buy metaverse stocks, which you can sign up for online. If you don't already have one, research your options before you sign up. Fidelity, Charles Schwab and E*Trade are among popular options.
3. Execute a Trade
Follow the specific instructions within your brokerage account's portal to fund your account and execute a trade. You'll typically navigate to the trading form by clicking a button that says "trade" and then selecting the option to buy.
You'll input the company name or symbol for the metaverse stock you wish to buy, then input your share order to execute the trade. Your brokerage should provide detailed instructions, but consider working with a financial advisor if you're unsure how to proceed.
Balance Your Investing Strategy
Dabbling in speculative assets like metaverse stocks and cryptocurrency can be an exciting way to invest with the possibility for future gains, but it's also an unpredictable, risky way to try to build wealth.
Remember to aim for balance in your portfolio by diversifying your investments. Most beginning investors will benefit from funding tax-advantaged retirement accounts such as a 401(k) or IRA first. You might also balance investing in metaverse stocks with less risky assets like mutual fund shares or bonds. A financial planner can help you navigate risk and choose the best investments for you.