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If you’ve been following the news, you’ve probably heard the term metaverse. You may even be aware that, much like the cryptocurrency market, the metaverse is a unique and pioneering digital investment opportunity.
But what exactly is the metaverse, and how can you invest in it? More importantly, is it actually worth investing in? We’ll answer those questions and more below.
What is the metaverse?
The metaverse is a virtual world where people can buy property. Property in the metaverse is sold as a nonfungible token (NFT), which signifies a unique piece of property.
There is no singular metaverse. In fact, there are multiple platforms that have digital worlds where you can buy assets. Currently, the most popular platforms are Decentraland, Axie Infinity and The Sandbox.
Each metaverse has its own marketplace where you can buy and sell land. If you own property or assets in one metaverse, you cannot transfer it to another metaverse.
How does owning assets in the metaverse work?
When you own an asset in the metaverse, it means that you have an NFT tied to a certain asset, like a parcel of land. The NFT will show that you are the legitimate owner of that asset, like a deed to a house.
Before you buy an asset in the metaverse, you can look at its previous sale history to see how much it has sold for. This can give you some idea of its current value and whether it’s priced fairly. However, values in the metaverse may fluctuate wildly, so you shouldn’t count on an asset maintaining or increasing in value.
When you want to buy property in the metaverse, you’ll have to visit the specific platform and pay for the asset with the right cryptocurrency. If you don’t have the right cryptocurrency necessary to buy that asset, you’ll have to purchase the cryptocurrency first. Then, you will be able to buy the asset.
When you want to sell the asset, you’ll list it in that specific metaverse and set a price. Once it is purchased, the cryptocurrency will be transferred to your wallet, minus any fees.
How to sell metaverse assets
The process of selling metaverse assets is like a combination of selling physical property and selling other types of NFTs.
Each metaverse has its own marketplace where you can list assets. You have to sell the assets in the metaverse that it’s currently located in; you can’t transfer assets from one metaverse to another.
Taxes and the metaverse
Because NFTs are so new, the process of acquiring and selling them has been rapidly changing. One aspect that has surprised consumers is that they may have to pay taxes when selling an asset in the metaverse.
If you end up making a profit on something you sold in the metaverse, try saving between 20 and 30% of that money for taxes. Keep it in a separate savings account so you’re not tempted to spend it on anything. This may seem like overkill, but you’ll be grateful you have the money come tax time.
You only need to save money for taxes if you made a profit on the sale. If you lost money, then you won’t owe the government anything.
Buy stock in metaverse companies
One of the simplest ways to invest in metaverse technology is to buy shares in a company that is involved in the metaverse. Major tech companies like Facebook, Apple, Microsoft and Google are developing their own products and services for the metaverse. When you buy a stock in one of these companies, you’ll reap the rewards if their metaverse technology succeeds.
You can buy individual stocks or portions of individuals through companies like Robinhood, TD Ameritrade or Charles Schwab. Make sure to compare fees and minimum requirements before you sign up. If you end up selling those stocks for a profit, make sure you save a portion to cover any taxes.
What to Know Before Investing in the Metaverse
Don’t invest all your money
The metaverse, NFTs and cryptocurrency are all popular buzzwords right now. And while it can feel like you’re getting in on the ground floor of the next big thing, the long-term success of these technologies is still up in the air.
There’s no real way to know how reliable and stable the metaverse is for investors. On the other hand, the S&P 500, which is the cornerstone of the US stock market, has been around for almost 100 years. That’s 100 years of history that investors can look back on and reference.
Anytime you’re investing in something new, you should treat it like dessert and not the main course. Don’t make it the focal point of your portfolio. Instead, allocate a small percentage – no more than 5% to 10% – to the metaverse, cryptocurrency or NFTs.
Yes, you might not strike it rich if you only put a small portion in the metaverse, but you’re also protected from losing all your savings. There are countless stories about regular investors who withdrew their money from the traditional stock market to invest in the metaverse or crypto, only to lose it all.
Have a strategy in place
Anytime you’re investing, you should know how much you want to invest, how often you want to invest and when you want to sell. Are you buying assets in the metaverse for the long haul? Or is this a short-term venture? Are you trying to reach a certain profit?
Knowing what you want to get out of investing in the metaverse will help you stay calm.
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Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Conscious Coins. More from Zina Kumok