Written by Tanner Banks, April 6, 2016
Let’s a-go! Mario is leaving the Mushroom Kingdom and Luigi for the New York Stock Exchange and Gordon Gecko. If you haven’t been watching the news, you’re in for a shocker: video games are big money these days. Wall Street seems to be looking for some golden coins, with the latest ETF by PureFunds, the PureFunds Video Game Tech ETF (GAMR). Now you can tell your family that you aren’t wasting your life playing video games (you’re not anyways), you’re just researching volatile, high-yield index funds. When you think about it, you aren’t duking it out with Master Chief or Jak and Daxter, you’re going up with Bill Gates and Kazuo Hirai (CEO of Sony).
The gaming industry is big. Like trending towards $100 billion big. There’s a reason why companies like Amazon have stepped into the fray, purchasing Twitch for $1 billion, and releasing the Amazon Lumberyard engine. Video games are truly a facet of nearly every piece of life. Video games are becoming professional and collegiate sports. It’s been in education for over a decade now, and the military has an odd fascination with duct taping Playstations together to make super computers. Heck, Facebook ruined bought the Oculus Rift for quite the pretty penny. Why? Because video games are dimes.
So what does GAMR look like? Eighty percent of the 36 different funds are made up of gaming companies. The top 10 companies comprise about 55 percent of the volume of the ETF, with Activision (9.46%), NCSoft, a South Korean company (5.85%), and Konami (5.72%) rounding out the top three. Other companies involved include Square Enix, Nintendo, GameStop, and *shudders* Ubisoft. So why pick up this ETF and not just invest in them individually? Because roller coasters are fun at the park, but not when you’re investing. Individual companies are volatile, while the industry is growing steadily. High profit margins and a continuously growing market are the key to GAMR.
As for PureFunds, here’s a snippet from their website about the index fund:
Exciting trends such as the shift to digital distribution of software, proliferation of HD and 4K displays, cloud content and streaming, virtual/augmented reality, motion tracking, episodic content, and diversified monetization models, are stimulating innovation and offer expanded opportunities for entertainment, education, simulation, and other game tech applications.
This index fund looks like it will be more of an entry into the investment world for gamers, and an entry into gaming for investors. With so much value tied into so few assets though, and a .75 percent expense ratio, it could be cheaper to do the index fund yourself. (Investing note: percent expense ratio is fancy talk for what a company charges you to maintain the fund.)
If you’re looking to get into the ETF world, this isn’t a bad choice, and as of April 4th, it’s trading at $26.48. It’s fairly affordable, the first of its kind, and you can brag you own dozens of gaming companies to your buds while you’re out for drinks. If you don’t feel like doing your own portfolio, there are certainly worse choices.