Let me be clear; I was very intentional with the word “investing” in the title of this article. I didn’t write “buying, flipping, selling” for a reason. The metaverse is the new gold rush—lots of investors will make millions, but more people will go home in tears.
As investors, we need to mitigate risk at all costs. We understand that all investing (even not investing) carries some form of risk/reward analysis. However, rushing off to purchase virtual land in a metaverse economy we know nothing about isn’t investing; it’s gambling (or speculating). But we can overcome the urge and make solid decisions.
Welcome back to The Metaverse 101 series (101), where we discuss entering the metaverse as investors. Today we have a great topic, so strap in and put on your thinking caps.
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Bird’s eye view. First, I want to give you a bird’ eye view of your investment portfolio. Before you enter the metaverse, you should have a dividend portfolio (dividend growth or income), a cryptocurrency portfolio, physical real estate or REITs, and royalties or a business.
In the article “Multi-Generational Investing,” I wrote that we should first get rich by doing what has proven to work. Many millionaires use the above items to make their money; therefore, you can follow right behind them.
I reference the bird’s eye view because you should already have a path to great wealth. Now, moving into the metaverse should be a way to diversify or accelerate your plan. If we enter the metaverse with the pure intention to make tons of money, we are more likely to make rash decisions.
Our traditional portfolio should allow for a bit of speculation (maybe 2-5% of our total). Investing in metaverse real estate should fall into the speculation category. So if we have $3,000 to invest in virtual real estate, then we have $3,000.
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We must frame our investing goals before we enter the virtual marketplace. Going into the new frontier trying to get rich isn’t such a good idea.
In the mid-1800s, the California gold rush was in full effect. Everyone rushed in to get a piece of the action, buying all the equipment necessary to dig for their freedom. However, the gold rush left most diggers in tears. On the flip side, the entrepreneurs selling shovels made significant profits. Who do you want to emulate, the diggers or the salesmen?
Traditional Real Estate Investor. Sorry for the introduction, but we must prepare the correct mindset when moving into the metaverse. When it comes to real estate, whether traditional or virtual, it still will follow the same basic rule—location, location, location.
I highly recommend everyone become a real estate investor BEFORE buying their first property (traditional or virtual). When I buy a home in, say, California, I need to understand the market.
I have to ask questions like:
- What are the rents?
- What kind of appreciation can I expect?
- What are the major attractions near me?
- What amenities are near me, such as schools, malls, restaurants, etc.?
- What businesses are near me?
When it comes to virtual real estate, you need to ask the same kind of questions. You may have to frame them differently, but they are strikingly similar.
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As an outside investor, you may not know much of the virtual land you are reviewing. Whose fault is that? The three main metaverse worlds today are Decentraland, Sandbox, and CryptoVoxels. You can read more about their virtual real estate on Coinflow News.
Have you visited these worlds before? I haven’t had the time to see any of them yet. I have a job, a family, and a business. Hopefully, one day I’ll retire and have more time to explore the new world.
Now, would you go and buy some expensive land in these worlds because everyone else is doing it? I hope not. Plots on land in these worlds are selling for high prices, in the $100s of thousands.
My first recommendation is to spend a ton of time in these worlds. Learn the language, make friends, involve yourself in chat rooms, Facebook groups, Twitter feeds, Discord groups, etc.; we shouldn’t have to ask others for investing advice. We should extract the proper investing thesis from our own research.
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Stability in the Virtual World. The central question you need to ask yourself is, “How do you know if your virtual world will survive?” Everyone and their mom will be starting a metaverse over the next few years.
Your job is to pick a winner, and it will prove to be complicated. However, remember that $3,000 from earlier? This amount of money will keep us grounded in reality. If you only have $3,000 to invest in virtual land, you need to find an up-and-coming virtual land.
That means you will need to research, read, join a community, and wait. There is absolutely nothing wrong with this, and I’d say that this is the most brilliant method. If you take your time, learn about new worlds and opportunities, and invest early, your chances are pretty high.
Think about the cryptocurrency craze. Who made more money, the people who bought Dogecoin at $0.0001 or the people who bought at $0.60? You have to think like this for all of the metaverse transactions.
Financial Independence through Real Estate 2
You may miss the trend in one virtual land, but other new methods will populate. The metaverse will open up brand new opportunities for everyone involved, and no one knows the magnitude yet. Don’t rush so much that you make bad decisions.
Unlimited Land. Another thing we need to consider is that virtual land is infinite. In reality, land is scarce, so it carries value. In the metaverse, creators just need to add another hard drive to produce more land. So how do we derive value from virtual land?
The answer is traffic. Virtual traffic, that is to say. This phenomenon is similar to search engine optimization or SEO. SEO brings visitors to someone’s website directly from Google or other search engines. The more organic (free) traffic you bring in, the more your website is worth.
Virtual real estate will be the same. If you buy a plot of land and don’t develop it, who will visit? You can buy land near hot spots in the virtual world, but it will be costly. You can’t just buy and hold a plot of land that is ten virtual acres from the city. It carries no value.
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Real estate is a mindset, and that goes twice as much in the virtual space. Because now you need to think about business and entrepreneurship as well.
In the book “Dirt Rich” Mark Podolsky talks about buying cheap land for pennies on the dollar. However, he also looks at the map as well as the city’s growth. He has to predict how the towns will expand over time. Will there be new apartments, freeways, or shopping centers—and where will the city locate them? Buying land that intersects with growth makes it very valuable.
You need to think about the expansion of your virtual world. Is the world for gamers, casuals, entrepreneurs, or shoppers? In the book “The Metaverse,” Terry Winters talks about hopping in the metaverse of your choice. Then you stand in an area for an extended period. Observe how much foot traffic is walking around your virtual plot of land? What brought these visitors to the site?
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Conclusion. Buying virtual lands is complex but not difficult. You just need to understand the virtual world, the real estate market, the land, the attractions, and the people. You need to join the community and learn about its future.
I know you may want the easy answer or the “win button,” but it doesn’t exist. As an investor, my job is to mitigate risk with knowledge. “There are no risky investments, only risky investors”—Robert Kiyosaki.
My recommendation is to build your traditional portfolio, determine how much speculation money you can afford, and spend a year in a few virtual worlds. Not sexy, but you will make a great buying decision in the end.
Hopefully, you have more questions now than when you started, which means I did my job. You’re welcome. Please join my Facebook Group if you want the latest articles and free books delivered to your news feed. Also, you can contact me inside the group and ask questions. I also have a Facebook Page where you can see my latest articles.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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