Although esports has been around for years, it is only recently that people have become interested in investing in esports. If you want to take advantage of the growth in sport, we have two great ways for you to do so. But first let’s take another look at what esports actually is.
Why invest in esports?
Tech-wise, the very first esports competition took place in 1972 when two dozen Stanford University students competed in a tournament for the game Spacewar. As a media stunt by a journalist, the winner received an annual subscription to Rolling Stone as a price.
It wasn’t called “esports” at the time, but this humble tournament has grown into a massive industry since then. The esports market was valued at $ 947 million in 2020 and is expected to grow rapidly – an estimate of $ 1.618 billion by 2024. That’s an increase of 71% in just four years. Even colleges and universities are now active with 175 new college esports teams starting May 2021.
While the majority of Americans get together for Super Bowl Sunday every February, it’s not too difficult that in a few years we will all meet to host Counter-Strike tournaments, Rocket League rallies, or Fortnite Friday parties.
With all this explosive growth, there is money to be made. But actually do Making money by investing, you have to do it smartly.
How to invest in esports
When it comes to sports, the first thing that comes to mind is probably sports betting. And you can certainly do that, but it’s just that – play, don’t invest. Here are good financial centers, we want to use a little more sense in our money strategy.
Instead, there are actually several ways you can invest – Really invest – in sport. The strategy mainly involves investing in companies or funds that directly support the sport. So you don’t necessarily invest in the tournaments or the teams yourself, but in the companies that make these tournaments possible.
When you look at it that way, your investment strategy suddenly looks much broader than just sports. It’s egaming as a whole, including non-esporters. After all, if you have an Xbox, you’re an egamer too. And this industry is even bigger than the sport itself: in 2020, the video game industry was valued at $ 175 billion.
Here’s how you can get a piece of it yourself.
If you’re interested in investing in esports, it’s probably fair to say that you are a gaming nerd yourself, but that doesn’t necessarily mean you know the pros and cons of all of the businesses involved. If you’d rather just play the games and make money passively rather than actively combing through the company’s investor reports, Exchange Traded Funds (ETFs) might be your best option.
Bonus points: Since you have invested in so many different companies with ETFs, this is a safe bet. They invest more in the entire esports sector than just one company. In general, when a company is fueling up, you’re still fine, as opposed to investing directly in a single company.
There are currently three main esports ETFs. However, keep an eye on the market as more options are likely to crop up as esports keep growing.
Founded in 2019 by Roundhill Investments, NERD is comprised of 35 companies largely involved in games, including video game makers, hardware makers, streaming services and holding companies that themselves invest in a wide range of esports-related companies. The top five positions include:
- Activision Blizzard (ATVI) – 5%
- Corsair Gaming (CSRS) – 5%
- Modern Times Group (MTGB SS) – 5%
- Tencent Holdings Ltd (700 HK) -5%
- AfreecaTV Co Ltd (067160 KS) – 4%
NERD has an expense ratio of 0.50% at a market price of $ 31.87 per share as of May 8, 2021. NERD’s track record is impressive: an annual increase of 127%. It can be purchased on many platforms that you are likely already familiar with, including Robinhood, TD Ameritrade, Etrade, and Fidelity.
HERO was also launched by Global X in 2019 and consists of 39 companies, many of which are identical to NERD. The top five positions include:
- Nvidia (NVDA) – 7%
- Sea Ltd (SE) – 7%
- NetEase (NTES) – 6%
- Activision Blizzard (ATVI) – 6%
- Electronic Arts (EA) – 6%
HERO’s expense ratio is also 0.50% with a share price of $ 31.35 on May 8, 2021. HERO’s average annual return is slightly less than NERD’s, but it still delivers an impressive 92% increase . You can also buy HERO on many popular platforms such as Robinhood or Fidelity.
ESPO is almost the oldest esports ETF launched by VanEck in 2018. It’s made up of 25 different companies, a smaller amount than NERD or HERO. Here are the top five positions:
- Nvidia (NVDA) – 9%
- Tencent Holdings Ltd (700 HK) – 7%
- Sea Ltd (SEA) – 7%
- Advanced Micro Devices (AMD) – 7%
- Nintendo (7974 JP) – 6%
With an expense ratio of 0.55%, ESPO is slightly more expensive than the other two options. Stocks are also slightly more expensive at $ 69.02 on May 8, 2021. In addition, an average annual return of 70% was achieved. ESPO is also available through brokers like M1 Finance and Stash.
If you’re the real nerd of nerds and you know the companies that make esports just as possible as gaming, you should consider investing with them directly, rather than as a middleman.
Choosing which stocks to invest in is a little beyond the scope of this article. But if you’re interested, here are a few quick details on some of the best esports companies to get your interested in. All information is up-to-date from May 8, 2021:
|ticker||Companies||PE ratio||Share price||52 weeks change|
|ATVI||Activision Blizzard||32.03||$ 93.43||25.63%|
|EA||Electronic Arts||35.21||$ 142.59||21.34%|
|UBSFY||UBISoft Entertainment||N / A||$ 15.30||-3.24%|
|CRSR||Corsair Gaming||N / A||$ 32.91||136.42%|
|SEA||Sea Ltd.||N / A||$ 242.99||281.94%|
|NTES||NetEase Inc.||39.46||$ 110.46||54.25%|
|EGLX||Enthusiast gaming||N / A||$ 8.05||731.64%|
The bottom line
The esports industry promises a lot of rapid growth. Of course, you want to take advantage of it, and if you’re interested, you should. But it’s also important to remember to keep things balanced and limit esports to just part of your overall portfolio.
It would be cool to say that you financed your retirement by investing primarily in sports, but you are also taking a huge risk in doing that. Any new industry prepared for rapid growth can also fail quickly (remember Beanie Babies and Pogs?).
Instead, we recommend dealing only for funsies with a ton of money that you can afford to lose. If you are serious and want to make it a bigger part of your portfolio, we encourage you to seek out a paid financial advisor.
Even if you are confident about what you are doing, it helps to get a second opinion. After all, the sport is best played as a team, as is your financial strategy.