Metaverse Portfolio, Series 2
The “Metaverse” refers to the growing network of virtual-reality (VR) spaces integrated with artificial intelligence (AI) and 3D technologies where users can interconnect within computer simulated
environments. It is an immersive, collaborative ecosystem in which the physical, digital and social intersect. From virtual and augmented reality software for entertainment and educational content, to
specialized virtual reality devices such as displays, lasers and other optics-related elements, the Metaverse has the potential to impact multiple sectors and industries, and, similarly to the development
of the Internet, may fundamentally transform our lives. While companies are working to build out this concept, it may take several years before key features become mainstream.
Consider The Following
- In October 2021, mega-cap company Facebook changed its long-held name to Meta Platforms,
Inc. This new name reflects its massive move into the Metaverse technology platform.1
- Bloomberg Intelligence estimates that the market size for the Metaverse could potentially
reach $800 billion by 2024, up from $478.7 billion in 2020.
- By 2026, Gartner predicts 25% of people will spend at least one hour a day in the metaverse
for work, education, shopping, social, and/or entertainment. In addition, an anticipated 30%
of organizations across the globe will have products and services ready for the metaverse.
- It is estimated that revenue from virtual gaming worlds could grow from approximately
$180 billion in 2020 to an estimated $400 billion in 2025.2
- In 2021, unit sales of VR headsets worldwide was estimated to reach 6.1 million units,
bringing the total cumulative installed base to 16.44 million units. By 2024, the cumulative
installed base of VR headsets is anticipated to surpass the 34 million mark.3
References to specific securities should not be construed as a recommendation to buy or sell and should not be assumed profitable.
1Kiplinger
2Grayscale Research
3Statista
Portfolio Objective
This unit investment trust seeks above-average capital appreciation; however, there is no
assurance the objective will be met.
Portfolio Selection Process
The initial universe of stocks is selected from the Indxx Metaverse Index as well as other Metaverserelated
companies. Next we examine the historical financial results of the stocks from the initial
universe. The stocks are then evaluated using fundamental factors such as sales, earnings and
cash flow growth; valuation factors such as price/earnings, price/cash flow, price/sales and price/
book; technical factors such as price momentum and earnings surprises; and qualitative factors
such as competitive advantages, new products and quality of management.
An estimated value is calculated for each of the companies utilizing a Cash Flow Return on
Investment (CFROI) method. A secondary valuation is also made employing a concept called
Economic Margin. The companies which currently trade at an attractive market price relative to
their estimated value are favored over companies that do not.
Our selection process attempts to find the stocks with the best prospects for above-average
capital appreciation by identifying those that meet our investment objectives, trade at attractive
valuations, and, in our opinion, are likely to exceed market expectations of future cash flows.
The final portfolio is selected by a team of equity analysts and consists of 25 approximately
equally weighted stocks.
| Not FDIC Insured • Not Bank Guaranteed • May Lose Value |
“Indxx” and “Indxx Metaverse Index” are trademarks of Indxx and have been licensed by First Trust Portfolios L.P. The Metaverse Portfolio is not sponsored, endorsed, sold or promoted by Indxx, and Indxx makes no representation
regarding the advisability of investing in such a product. Indxx has no obligation to take the needs of First Trust or the unit holders of the product into consideration in determining, composing or calculating the Indxx Metaverse Index.
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial professional
or call First Trust Portfolios, L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
Risk Considerations
An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with owning common stocks, such as an economic recession and the
possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.
You should be aware that the portfolio is concentrated in stocks in both the communication services and information technology sectors which involves additional risks, including limited diversification. The companies engaged
in the communication services sector are subject to rapidly changing technology, rapid product obsolescence, loss of patent protection, cyclical market patterns, governmental regulation, evolving industry standards and
frequent new product introductions. Certain companies may be particularly susceptible to cybersecurity threats, which could have an adverse effect on their business. The companies engaged in the information technology
sector are subject to fierce competition, high research and development costs, and their products and services may be subject to rapid obsolescence. Technology company stocks, especially those which are Internet-related,
may experience extreme price and volume fluctuations that are often unrelated to their operating performance. There is no assurance that the projections stated herein will be realized.
The Metaverse is a new and developing technology, the consequences of which have not been fully explored. Risks associated with Metaverse companies may not fully emerge until the technology is more widely used.
Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers.
Large capitalization companies may grow at a slower rate than the overall market.
As the use of Internet technology has become more prevalent in the course of business, the trust has become more susceptible to potential operational risks through breaches in cybersecurity.
In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
The COVID-19 global pandemic has caused and may continue to cause significant volatility and declines in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.
The value of the securities held by the trust may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers.
Although this portfolio terminates in approximately 15 months, the strategy is long-term. Investors should consider their ability to pursue investing in successive portfolios, if available. There may be tax consequences unless
units are purchased in an IRA or other qualified plan.