How to invest in the metaverse and create wealth

Date : 12/12/2022
Read: 7 mins

Meta, Microsoft, Apple, and many other companies are betting big on the metaverse. Understand what it is and the investment opportunities in it for you.

These days, digitalisation has become a key part of our lives. We use digitalisation to work from anywhere, shop online from anywhere, socialise using platforms such as Facebook and WhatsApp, and get entertained using apps such as Netflix. Today, it is impossible to imagine life without digitalisation.

The metaverse plans to take digital life to the next level. In this article, we will explore what is implied by the metaverse, its applications, and how investors can benefit from it.

What is the metaverse?

In simple terms, at a broad level, the metaverse is a digital replica of the real world. You can understand it better by comparing it to some real-world elements:

In the real world, there are individuals. In the metaverse also, there are individuals. You can create your digital avatar in the metaverse.
In the real world, there is real estate. Similarly, in the metaverse, there are virtual retail shops, shopping malls, offices, etc.
In the real world, people rent out their space for advertising. In the metaverse also, you can rent out your virtual space.
In the real world, we have various sports, such as cricket, soccer, etc. In the metaverse also, virtual sports can be organised. You can see your favourite players in action and even participate in sports through your digital avatar.

To sum up, the metaverse is a virtual replica of the real world. It is a digital world where people live, work, socialise, shop, etc. They do almost everything in this virtual world that they are currently doing in the real world. The only thing is they will control all these virtual activities they will do in the metaverse from the real physical world.

How big is the metaverse? Why should you invest in it?

As per a report published on Moneycontrol, the metaverse market size was around $40-60 billion in 2021. However, as per investment banks like Goldman Sachs, Morgan Stanley, and Citibank, the metaverse market size is expected to grow to a whopping $8-13 trillion by 2030. In other words, this market is estimated to boom at a CAGR of 70%.

Companies across industries and sectors have either jumped onto the metaverse bandwagon or are in the process of doing it. Here are some examples:

Sotheby’s opened a virtual art gallery
Nike is offering digital wearables such as sneakers
Samsung has set up a virtual store in Decentraland
Louis Vuitton released a puzzle adventure game: 'Louis the Game'
Coco-Cola has organised a virtual party in the metaverse

Considering the humongous growth potential of the metaverse, it makes sense for you to invest in it and benefit from it.

How to invest in the metaverse?

Now that we have a fair idea about the metaverse and its future potential, let us understand how you can invest in various metaverse companies for wealth creation.

1) Companies building the metaverse

Various companies are building their version of the metaverse. For example, Meta (formerly Facebook) is building a metaverse along the lines of almost everything we have in the real world. Microsoft is building its metaverse in their Microsoft Teams tool used for virtual meetings. Epic Games is building a metaverse for gaming and other activities. Decentraland's metaverse encompasses real estate.

As an investor, you can invest in these companies that are building their versions of the metaverse. For example, Meta, Microsoft, etc., are listed on Nasdaq. So, you can invest directly in their shares or through international mutual funds offered by Indian AMCs. For example, some fund houses offer the Nasdaq 100 index fund that will give you exposure to these companies.

2) Companies supporting the metaverse

Another way to invest in the metaverse is by investing in companies building or providing products and services that support the metaverse. For example, companies building/providing tools such as Virtual Reality (VR), Augmented Reality (AR), etc. These products are required to enhance your metaverse experience.

All the transactions that happen in the metaverse need cryptocurrencies. So, investors can invest in companies providing digital currencies or crypto trading platforms that help exchange digital currencies. People will need a good internet/broadband connection to experience the metaverse, so companies like Jio, Bharti, etc., that provide internet services can be metaverse investment candidates.

India’s largest IT company TCS started its metaverse journey with the development of the Avapresence platform. The company also has a ‘virtual bank’ for retail transactions and an NFT marketplace.

Also Read: 4 NFT Investment Strategies That Can Maximise Your Profits

3) Buying and selling digital assets

As an investor, you can purchase various digital assets from the metaverse. For example, Decentraland offers investors various digital assets such as land, artwork, collectables, etc. Yes, you can buy virtual real estate, such as a plot of land. Land and other digital assets can be bought on Decentraland through the ‘MANA’ token.

There are only 90,000 land parcels in Decentraland. As the metaverse becomes popular and more buyers emerge, the demand and the prices of virtual real estate are expected to appreciate. When that happens, investors can sell their existing virtual land to another buyer for a profit.

The Decentraland marketplace also provides other investment opportunities for creators. For example, fashion designers can design various wearables and sell them. You can buy designer wearables for your digital avatar. Similarly, game designers can create new games and offer them to gaming enthusiasts.

4) Renting out digital assets

In the earlier section, we saw how you can buy virtual real estate on Decentraland. However, not everyone may have the capacity to buy virtual real estate as it already comes with a high price tag. This offers existing virtual landowners an opportunity to give their virtual land on rent and earn money.

Your virtual land can be rented to various fashion or electronics brands to put up their stores. The other option is to rent the land to a corporate to set up their virtual office. The virtual land can also be rented to content creators. They can use the land to organise various events. The organiser can make money by selling the event tickets to the audience.

Also Read: How Virtual Digital Assets Taxed In India?

5) The gaming industry

Various gaming companies have a big presence in the metaverse. In fact, they are one of the earliest and biggest adopters. Microsoft is a big name in the gaming industry, having acquired Minecraft in 2014. It also owns popular games such as Call of Duty, Candy Crush, Warcraft, etc. Recently, the company announced the acquisition of gaming giant Activision Blizzard for $68.7 billion. With this, Microsoft's metaverse plans will get a further boost.

Other gaming companies with big plans for the metaverse include Roblox, Axie Infinity, Sandbox, etc. Most of these metaverse platforms offer various ways of making money. Developers can sell products and services to game players. The players can collect points and convert them to money or win cash rewards directly.

Indian gaming company Nazara Technologies is building its presence in the metaverse with its immersive games. Currently, its regular games contribute a big chunk of the company’s portfolio. However, there is scope for the metaverse portfolio to scale up in future.

Also Read: Does India's Online Gaming Industry Offer Good Investment Potential?

The metaverse is going to be the future

With digitalisation becoming a key part of our life, there is no doubt that the metaverse will be the future. Its builders are trying to replicate everything from the real world into the virtual world. As of November 2022, the metaverse market is less than $100 billion. However, some big investment banks expect the metaverse market to grow beyond $10 trillion by 2030. Investors cannot afford to miss such a big growth opportunity.

It is worth noting that the metaverse stock universe is big in the US. So, Indian investors can invest in these companies through US international mutual funds or direct stocks such as Meta, Apple, Microsoft, etc. In India, the metaverse investment opportunity is currently limited to direct players like TCS and Nazara Technologies, and indirect players like Jio and Airtel (which provide internet services).