• ETFs increasingly popular as an investment option
• Metaverse ETFs enable diversified investing in trending topics
• Study finds underperformance
With ETFs, investors invest in a large number of companies without having to buy the shares individually. Exchanged traded funds replicate the development of complete indices and are considered a cheap and relatively simple way of investing in the financial market without having to put too much care into your own investment.
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ETFs on major stock market indices such as the DAX, the S&P 500 or the EuroStoxx 50 have established themselves on the market, but the exchange-traded index funds offer investors completely different options. For example, investors can invest in specific sectors, commodities or stocks, and bond ETFs are also offered.
Theme ETFs increasingly popular
There are also exchange-traded index funds that are dedicated to certain trend themes. Investors have the opportunity to pursue specific investment ideas and to depict market trends that are expected to perform disproportionately. The themes on which theme ETFs specialize are quite diverse: There are ETFs on certain political trends, social issues or even special types of technology. There are also aerospace or fintech ETFs on the market, as well as exchange-traded index funds on the subject of sustainability or the cloud. In this way, investors can make targeted investments in specific sectors, topics and trends without accepting too broad a market diversification.
Anyone who chooses a theme ETF focuses on a specific topic, diversifies their portfolio, but at the same time because they invest in a wide variety of companies. That way, you reduce your risk and increase the likelihood that the ETF will also contain the disruptor to come, rather than just those industry players who may be left behind in the future.
Metaverse ETFs – a cheap option to benefit from the megatrend
ETF products are now also being offered on one of the biggest trending topics on the market, the Metaverse. The Metaverse is considered by many observers to be Internet 3.0, an evolved version of the World Wide Web. Investors who are interested in correspondingly focused products can use a Metaverse ETF to map the related topics of augmented reality and virtual reality at the same time.
As a rule, Metaverse ETFs not only contain shares in companies that want to promote the Metaverse concept and that act as providers of virtual environments or want to earn money with products for the Metaverse. Semiconductor manufacturers are also often found in such a diversified theme ETF, after all, the metaverse is also linked to major technical challenges.
In addition, blockchain applications are difficult to separate from the Metaverse topic, so that many ETFs designed in this way also include blockchain providers – as well as stocks of online gaming providers who have corresponding products for the Mediaverse on the market or are planning them specifically for this market .
Criticism of Metaverse ETFs
However, ETFs with a thematic focus are not the right choice for every investor. Because while ETFs are inherently considered a more diversified investment option, investors with a Metaverse ETF are committing themselves to a specific focus.
In addition, the Metaverse is still a fairly young idea, so there is hardly any historically valid data on the development of special Metaverse ETFs. The fund volume is also initially manageable for fairly new market ideas.
In a study from 2022, the Ohio State University also took a closer look at so-called theme ETFs and came to a thoroughly sobering conclusion. The research found that ETFs based on current trending market topics have average returns that are about 30 percent below those of more diversified funds over the five years since their launch. “If people chase these popular investment themes, they’re going to be disappointed,” said Itzhak Ben-David, co-author of the study and professor of finance at Ohio State University’s Fisher College of Business. In his view, these top funds “were based primarily on hype and tend to fall in value relative to the general market almost as soon as they launch.”
Nevertheless, Metaverse ETFs can also be an opportunity – namely when investors are convinced of the future viability of an idea, but no clear market winner has yet emerged. In this case, a Metaverse ETF is the better choice than a share investment, because it is often not yet possible to tell whether you have the future market leader in your portfolio with current trend topics.
Editorial office finanzen.net
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