Metaverse exchange-traded funds (ETFs) give you the opportunity to get in on the ground floor of a potentially lucrative technological trend. Early attempts to build a metaverse have been a mixed bag, with Mark Zuckerberg's rebrand of Facebook as Meta (META 0.94%) having a negative impact on its reputation. But we're still in the very early stages.
This means investors who get in now could see outsized returns as the metaverse becomes more mainstream. Several research groups have predicted massive growth for the metaverse, with Contrive Datum Insights expecting it to be worth more than $1.3 trillion by 2030. If you'd like to invest in it without handpicking companies, ETFs could be the answer. In this guide, we'll go over the metaverse and the top metaverse ETFs to buy.
Understanding the metaverse
Understanding the metaverse
The metaverse is a broad concept, but it essentially refers to a network of immersive virtual worlds. People can enter these worlds and interact with them, as well as other users, through avatars. You can access the metaverse using a virtual reality (VR) headset.
There are all kinds of possible uses of the metaverse. Video games are a natural fit; virtual world games where you interact with other players are already popular. Instead of interacting with these games through a two-dimensional screen, metaverse gaming would allow players to get closer to the action.
It could also be the next evolution of socializing online. People have always used the internet to communicate with others, starting with chat programs in the early days and progressing to video calling. With the metaverse, people could get the experience of being in the same room with friends and family instead of just seeing them on a screen.
The metaverse is definitely an exciting idea, especially if you're a sci-fi fan who has read about similar concepts for decades. It's bringing lots of interesting new ideas to life, including things like virtual events and digital real estate. And many of the largest companies in the world are investing large amounts of money in it. That includes tech giant Apple (AAPL 0.41%), which launched its Vision Pro mixed-reality headset in February 2024 — although sales of that product haven't met expectations.
Three top metaverse ETFs to buy in 2024
Now, let's look at the best metaverse ETFs that invest in tech stocks and other companies related to the metaverse.
1. Roundhill Ball Metaverse ETF
1. Roundhill Ball Metaverse ETF
The Roundhill Ball Metaverse ETF (METV -1.25%) is designed to track the Ball Metaverse Index. The index consists of globally listed companies with active involvement in the metaverse, including companies that design virtual worlds and/or virtual assets, supply computing power, financial services companies that support digital currency payments, and more.
This ETF has a high concentration of large-cap stocks. It has more than 40 holdings and an expense ratio of 0.59%. Its top holdings include:
The fact that this metaverse ETF has so many large companies is both good and bad. It should be less volatile than ETFs with more money allocated to smaller companies. After all, several of its top holdings are market leaders.
However, this could also mean less upside for investors in the ETF if the metaverse takes off. Even though companies like Apple and Microsoft are investing in the metaverse, they're already massive businesses with a variety of products and services. The success of the metaverse won't affect them as much as it would smaller companies that are more heavily focused on it.
2. Fidelity Metaverse ETF
2. Fidelity Metaverse ETF
Fidelity, one of the largest brokers, has also gotten in on the action with its own metaverse ETF. The appropriately named Fidelity Metaverse ETF (FMET -1.33%) invests at least 80% of its assets in the Fidelity Metaverse Index.
This is one of the broadest metaverse ETFs, with more than 50 holdings. Funds are spread out in about a 75/25 split between domestic and international equities. It invests most heavily in the information technology and communication services market sectors.
Here's a look at some of this ETF's top holdings:
- Advanced Micro Devices (AMD -2.39%)
- Nvidia
- Meta
- Alphabet (GOOG 5.33%)(GOOGL 5.59%)
- Qualcomm (QCOM -2.66%)
A notable advantage of the Fidelity Metaverse ETF is that it's less expensive than many of its competitors. It has an expense ratio of 0.40%.
3. ProShares Metaverse ETF
3. ProShares Metaverse ETF
The ProShares Metaverse ETF (VERS 0.67%) aims to track the Solactive Metaverse Theme Index. This focuses on companies that use innovative technologies to offer products and services around the metaverse.
This ETF has a similar expense ratio to Roundhill's at 0.58%. It's much more heavily weighted toward domestic equities than the other funds on this list, with about 85% of its holdings in U.S. companies. Its top holdings include:
Even though it's concentrated in domestic companies, this ETF's holdings are spread across several sectors. These include semiconductors, media and entertainment, software, and technology hardware and equipment.
Pros and cons
Pros and cons of investing in the metaverse
There are some great reasons to invest in the metaverse, but there are also some potential drawbacks. Before you buy any metaverse ETFs, it's important to know about the pros and cons. Here are the biggest pros of metaverse investing:
- Since metaverse technology is still in the early stages of its development, tomorrow's most successful metaverse companies could be undervalued today.
- Many of the largest metaverse companies are tech stocks, and those tend to have high growth potential.
- Research has projected that the metaverse could grow significantly, possibly being worth more than $1 trillion by the end of the decade.
Here are the cons of investing in the metaverse:
- The metaverse is unproven, and there's no guarantee it will be successful.
- There are all kinds of companies and crypto projects claiming to be working on metaverse applications. This makes it hard to figure out which companies to invest in.
- Fees for metaverse ETFs are on the high side.
Related investing topics
Should you invest?
Should you invest in the metaverse?
If you have a diversified portfolio, then odds are that you're already invested in the metaverse, at least to some extent. Many of the largest tech companies are working on metaverse products or services, so if you have any of them among your holdings, then you have some metaverse exposure.
Depending on how much you believe in the metaverse, you may want to make it more of a focus in your portfolio. You could do that with one of those metaverse ETFs or by investing more in companies heavily tied to the metaverse.
Keep in mind that exciting new technologies don't always pan out. And even when they do, it often takes time, with a lot of volatility for early investors. (Just look at the cryptocurrency market for the perfect example.)
Whatever you decide to do, make sure to maintain a balanced portfolio with investments across the major market sectors. Metaverse stocks could give your portfolio more potential upside, but balance is also important to reduce your risk.
