Metaverse is a digital universe driven by augmented or virtual reality technology. You can interact with friends or AI machines via social media, play online games, and earn cryptocurrencies.
Metaverse investing involves funding companies promoting businesses around the metaverse, like Meta(Nasdaq: Meta) and Microsoft(Nasdaq: MSFT), through exchange-traded funds(ETFs), besides stocks.
Instead of metaverse stocks, an ETF investor can benefit from diversifying and regularly rebalancing his portfolio. A metaverse ETF is the ideal choice for passive or busy long-term investors.
The following table illustrates the features of 5 current popular metaverse ETFs:
| Evolve Metaverse ETF(MESH) | First Trust Indxx Metaverse ETF(ARVR) | Fount Metaverse ETF(MTVR) | Horizons Global Metaverse Index ETF(MTAV) | Roundhill Ball Metaverse ETF(METV) | |
|---|---|---|---|---|---|
| Listing exchange | Toronto Stock Exchange | Nasdaq Stock Exchange | New York Stock Exchange ARCA | Toronto Stock Exchange | New York Stock Exchange ARCA |
| Fund management style | Actively-managed | Passively-managed | Passively-managed | Passively-managed | Passively-managed |
| Expense ratio | 0.6% | 0.7% | 0.7% | 0.55% | 0.59% |
| Assets under management | CAD9.938 million | USD1.43 million | USD5.3 million | CAD$4.7 million | USD441 million |
| Underlying index followed | N/A | Indxx Metaverse Index | Fount Metaverse Index | Solactive Global Metaverse Index | Ball Metaverse Index |
| Inception date | Nov 24, 2021 | Mar 23, 2022 | Oct 27, 2021 | Nov 26, 2021 | Jun 30, 2021 |
| Place of offering | Interactive Brokers | Interactive Brokers | FSMOne, Interactive Brokers, Moomoo, and Tiger Brokers | Interactive Brokers | FSMOne, Interactive Brokers, Moomoo, TD Ameritrade, Tiger Brokers |
| Top 5 holdings | Coinbase Global Inc., eXp World Holdings Inc., Meta Platforms Inc., Roblox Corp., Nvidia Corp. | Meta Platforms Inc., Nvidia Corp., Snap Inc., Advanced Micro Devices, Inc., STMicroelectronics NV | Apple inc., Alphabet Inc., Meta Platforms Inc., Pinterest, Adobe Inc. | Meta Platforms Inc., Tencent Holdings Ltd., Nvidia Corp., Alibaba Holding Group Ltd., Mastercard Inc. | Apple Inc., Nvidia Corp., Roblox Corp., Microsoft Corp., Meta Platforms Inc. |
What is a Metaverse ETF?
Like other exchange-traded funds, a metaverse ETF tracks investments from a metaverse index. A metaverse index is a metric tracing theme-related technology stocks, e.g., Alphabet, Nvidia, Bitcoin, and Intel corporation making up the concept.
The market has grown due to evolving technology and investors’ passion since the November low. The Nasdaq composite index comprising mainly tech stocks like Meta, Autodesk, and Adobe, has surged more than 20% this year. Technology stocks have been the best performers since this year’s beginning.
A metaverse ETF, a passively-managed fund, tracks and invests in the themed stocks from a metaverse index. The fund manager changes fund composition and rebalances a fund’s portfolio in line with an index.
The S&P DJI defines: “the Metaverse as a new ecosystem where physical and virtual worlds communicate, blend, and integrate using the next generation internet & Extended Reality(XR) technology.”
The company designs an equity index called the “S&P Kensho Metaverse Index,” measuring the companies’ performance in the Metaverse.
However, different funds follow different metaverse indexes and investment strategies. Before investing in an exchange-traded fund, you should understand an index methodology of tracking metaverse stocks and a fund’s expenses.
Benefits of Investing in Metaverse
A recent report by Research and Markets predicts the global metaverse market will reach USD700 billion in revenue by 2030, while the current market is USD22.79 billion(a compound annual growth rate of close to 40%.)
The metaverse market users include financial services, education, gaming & entertainment, social media, healthcare, and live events. Investors may benefit from the exponential market growth within the decade.
Yet, you should be aware of the high volatility of metaverse stocks, with the Nasdaq composite index going downward by one-third during 2022. The Nasdaq composite index comprises most metaverse and other technology stocks.
Who Should Invest in Metaverse ETFs and Why?
You may be a potential investor for metaverse ETFs, possessing the following characteristics:
- Realize the potential growth of metaverse technology and products for this and the subsequent decades
- A long-term investor prefers hassle-free investments
- You believe in the theory of high risks for high rewards
Metaverse stocks possess highly fluctuating price risks. Investors should consult a financial advisor to analyze their risk appetite before buying metaverse ETFs.
How to Choose the Best Metaverse ETF for your Needs
The factors below are the reasons you should consider whatever type of investors:
1. Performance
If you opt for towering, though not extraordinary, returns, one of the metaverse stocks, for instance: Nvidia(NVDA), has climbed close to 300% in share price over the past 5 years. However, not every stock is the same! Facebook(Meta) has performed less than 10%.
The past performance data gives you an excellent reference, though it is not an accurate indicator for the future.
You should benefit from diversifying the risks by investing in more stocks within a metaverse index.
2. Expense ratio
Unlike other ETFs, metaverse ETFs charge more, ranging more than 0.5% or above than a typical ETF. An expense ratio is an annual fee an ETF investor pays to cover an ETF’s running costs. The higher an expense ratio, the less return an ETF will be, other things equivalent.
Investors should consider fund costs besides past performance to maximize potential returns.
3. Fund History
Most metaverse ETFs have a short history and hardly give a reliable reference to the operating record. Metaverse investing has been a popular trend until recently since Mr. Mark Zuckerberg, the owner of Facebook, initiated the metaverse living concept a few years ago.
The performance history of metaverse indexes and funds is rare; investors should study and consult other financial advisors and resources for more reliable information.
The Top 5 Metaverse ETFs on the Market Today
Let’s go to the 5 popular metaverse ETFs:
1. Evolve Metaverse ETF(TSX: MESH)
Objectives
Listed in the Toronto Stock Exchange on Nov 24, 2021, MESH pursues capital growth by seeking investors’ access to global metaverse businesses. MESH is an actively-managed investment fund. The fund currency is the Canadian dollar hedged.
Evolve holds 31 metaverse stocks, including Adobe, Autodesk, Microsoft, Activision Blizzard, and Amazon. The portfolio comprises three types of companies: 1. Virtual/augment software and semiconductor manufacturers, 2. Software tool producers, 3. Companies designing and operating 3D immersive platforms for socializing and interactions.
Asset under management: CAD9.938 million(as at Feb 03,23)
Expense ratio: 0.6%
Performance: -47.87% since fund inception as of Dec 31, 2022
Industry weight: Technology: 58.23%, Communications: 28.82%, Financial: 9.88%, Consumer Cyclical: 3.08%
Geographic weight: United States: 79.31%, China: 9.02%, Singapore: 3.45%, Taiwan: 3.2%, Japan: 3.08%, France: 1.94%
Top 5 holdings: Coinbase Global Inc., eXp World Holdings Inc., Meta Platforms Inc., Roblox Corp., Nvidia Corp.
Place of offering: Interactive Brokers
2. First Trust Indxx Metaverse ETF(Nasdaq: ARVR)
Objectives
Listed in the Nasdaq Stock Exchange on Mar 23, 2022, the ETF tracks the Indxx Metaverse Index and seeks yields and capital appreciation. The investment strategies use at least 80% of net assets and borrowings to increase investment returns from stocks and depository receipts comprised by the index.
About the Indxx Metaverse Index
- The index includes US and non-US metaverse companies in developed and emerging markets.
- Components must have a daily average turnover of at least USD5 million with a market cap of USD1 billion and a free float of a minimum of 10% of shares.
- The index only includes companies conducting 50% of assets or deriving 50% of revenue from metaverse businesses.
- The index sponsor rebalances quarterly and reconstitutes its portfolio semi-annually.
- First Trust invests in up to 50 stocks based on market capitalization and equally weighted.
- The index halves the weight of companies with a market cap of less than USD 10 billion, with the remaining weight allocated to other components equally in the index.
Asset under Management: USD1.43 million
Expense ratio: 0.7%
Performance: -18.98% since fund inception as of Dec 30, 2022
Main industry weight: Entertainment: 31.14%, Semiconductor and semiconductor equipment: 27.3%, Software: 14.83%
Main geographic weight: United States: 65.11%, Japan: 15.36%, China: 8.86%
Top 5 holdings: Meta Platforms Inc., Nvidia Corp., Snap Inc., Advanced Micro Devices, Inc., STMicroelectronics NV
Place of offering: Interactive Brokers
3. Fount Metaverse ETF(NYSEARCA: MTVR)
Objective
Listed on the New York Stock Exchange on October 27, 2021, Fount Metaverse ETF tracks Fount Metaverse Index composing around 50 companies. Like other metaverse ETFs, the exchange-traded fund capitalizes on the capital growth of metaverse stocks.
About Fount Metaverse Index
- The index identifies investment based on 4 types of companies: augmented realities, life log, mirror world, and virtual world.
- The index uses a proprietary artificial intelligence algorithm to forecast the incoming year’s revenues of related companies.
- Fount Metaverse index is a market-weighted index and is rebalanced annually.
Asset under management: USD5.3 million
Expense ratio: 0.7%
Performance: -36.69% since inception(Dec 31, 2022)
Main industry weight: Technology: 66.49%, Consumer Cyclical: 33.51%
Main geographic weight: United States: 48.46%, Japan: 18.1%, South Korea: 11.88%, Hong Kong: 11.59%
Top 5 holdings: Apple inc., Alphabet Inc., Meta Platforms Inc., Pinterest, Adobe Inc.
Place of offering: FSMOne, Interactive Brokers, Moomoo, and Tiger Brokers
4. Horizons Global Metaverse Index ETF(TSX: MTAV)
Objective
Listed on the Toronto Stock Exchange on Nov 26, 2021, Horizons replicates the Solactive Global Metaverse Index investments and seeks long-term gains from investing in metaverse companies. The portfolio hedges its Canadian dollars to US dollars.
About the Solactive Metaverse Index
- Like other metaverse indexes, the Solactive index is also a market-weighted metric.
- The index provider identifies a metaverse company based on 5 characteristics: augmented/virtual reality, creator economy, digital infrastructure, digital marketplace, gaming & digital payments.
- The index also uses its proprietary software: ARTIS, to locate investments.
- The 50 companies selected by the system are weighted according to their market capitalization
- Each stock does not exceed 5% in the underlying index.
- The index sponsor rebalances the portfolio quarterly.
Asset under management: CAD$4.7 million as of Feb 06, 2023
Expense ratio: 0.55%
Performance: -25.51% since inception as of Jan 31, 2023
Main industry weight: Digital Marketplace: 26.06%, Augmented/Virtual Reality: 20.95%, Digital Infrastructure: 13.49%, Digital Payment: 13.3%, Gaming: 13.13%, Creator Economy: 12.7%
Main geographic weight: United States: 75.44%, China: 17.61%, Japan: 4.84%
Top 5 holdings: Meta Platforms Inc., Tencent Holdings Ltd., Nvidia Corp., Alibaba Holding Group Ltd., Mastercard Inc.
Place of offering: Interactive Brokers
5. Roundhill Ball Metaverse ETF(NYSEARCA: METV)
Objective
Listed on the New York Stock Exchange on June 30, 2021, Roundhill Ball Metaverse ETF mimics the components from the Ball Metaverse Index, which is the first index to track global metaverse companies.
The index composes a tiered-weight portfolio of globally listed companies of the metaverse. Besides, the ETF invests 80% of net assets in metaverse equities.
About the Ball Metaverse Index
- The index includes companies ranked by 7 categories: hardware, compute, networking, virtual platforms, interchange standards, payment, content & assets & identity services.
- Once categorized, companies will be subdivided into 3 types: “pure-play” companies, core companies, and non-core companies.
- The Ball Metaverse Index considers companies with a market capitalization of at least USD259 million and an average daily traded volume of at least USD2 million over the past 6 months.
- Current components must maintain a market cap of at least USD200 million.
Asset under management: USD441 million
Expense ratio: 0.59%
Performance: -52.32% since inception as of Dec 31, 2021
Main industry weight: Gaming Platforms: 21.7%, Computing Components: 21.1%, Cloud Solutions: 19.1%
Main geographic weight: United States: 75.7%, China: 9.3%, South Korea: 4%, Japan: 3.8%, Taiwan: 3%
Top 5 holdings: Apple Inc., Nvidia Corp., Roblox Corp., Microsoft Corp., Meta Platforms Inc.
Place of offering: FSMOne, Interactive Brokers, Moomoo, TD Ameritrade, Tiger Brokers
Tips: How to Invest in Metaverse ETFs
Metaverse ETFs are a part of the new thematic investing, besides individual stocks. Analysts predict the metaverse market has potential growth for the next decades so are the risks.
Tips for investing in metaverse ETFs
Investment strategies: Besides investing in components from an index, a fund may borrow to increase the returns. Higher leverage may increase the risk of losses if the market goes south. You should avoid leveraged metaverse ETFs if you are conservative.
Beginner investors: New investors should understand that a metaverse ETF is a long-term investment and may face high volatility. A recent experience is the disastrous falls of most technology stocks and ETFs during the second half of 2022.
Treated from a long-term perspective, quality metaverse stocks and ETFs should return tremendous rewards to investors.
Finally, new investors should choose metaverse ETFs rather than stocks to diversify risks.
Risks
- Short-term fluctuations: Innovation isn’t a new concept in technology, especially when commercializing. Metaverse adventures in investing from zero to multibillion enterprises are not smooth along the road. You should get ready for numerous ups and downs in the time to come. Google is facing a threat from Microsoft with the launch of the ChatGPT, and so are other metaverse giants one day in the future.
- Lack of industry data: Metaverse investing is a new investing theme in the market until a few years ago. Debates about the industry evolution and lack of more data regarding the performance and studies may lead investors to misjudge investment strategies and decisions.
Read Also: DCA Investing and Best Brokerages and Trading Platforms
FAQs
1. Is investing in Metaverse ETFs Profitable?
Most metaverse ETFs have recorded negative numbers due to recent market routs. The reasons are twofold. The first is the overall market sentiment towards the new investing theme. Investors are still digesting the new factors regarding the industry.
Secondly, a lack of industry data and the entry of fewer market players reduce the transparency and investors’ interest in the industry.
However, a study gives a spotlight on this industry’s future. A report by Research and Markets states the industry may reach revenue of USD700 billion from the current USD22.79 billion in 2021. Investors may reap a huge reward by investing in the metaverse industry through ETFs.
2. Metaverse Stocks or ETFs, Which Should I Choose?
If you are not a financial professional in this field, you should resort to a metaverse ETF for investing purposes. The reasons are:
- Expertise: Investing, especially metaverse, requires time and effort in research and analysis. Lack of both may reduce your chances of success and give rise to losses. A metaverse ETF manager takes full-time responsibility for investing and provides all-around services to investors.
- Market access: Metaverse investing, a global investing industry, requires worldwide channels and, subsequently, increases costs like trading, custodian, and currency exchange. A metaverse ETF gives investors access to worldwide markets and more profit opportunities due to its access power.
- Investing risks: Unless you have sufficient funds to cover the entire universe of metaverse stocks, you may miss some profiting opportunities.
A metaverse ETF is a basket holding a wide range of stocks and distributing equal ownership to investors. In other words, a metaverse stakeholder can own all stocks of an ETF by investing in an exchange-traded fund. He may diversify concentration risks by diversifying investments.
The Bottom-Up
Metaverse industry is one of investing stars in the future. Poised to become a pillar of investing industry, metaverse ETFs give access and market diversification to more investors. Yet, investors should brace for fluctuations caused by their high volatility nature.
Key takeaways
- The best 5 metaverse ETFs are: Evolve metaverse ETF(MESH), First Trust Indxx Metaverse ETF(ARVR), Fount Metaverse ETF(ATVR), Horizons Global Metaverse ETF(MTAV), Roundhill Ball Metaverse ETF(METV)
- All are passively-managed ETFs tracking metaverse indexes except for Evolve metaverse ETF.
- Metaverse ETFs are suitable for long-term investors.
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