Investing in virtual reality stocks

The technology is enticing but remains a novelty — for now.

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Virtual reality has shifted from sci-fi speculation to real-world tech. But is there a viable industry beneath the hype? Australian investors may need to be patient if they plan on investing in virtual reality stocks.

What is virtual reality?

Virtual reality (VR) is a computer-generated experience that allows users to interact with a simulated 3D environment. People typically access this environment with the help of a VR headset, or head-mounted display, like the Oculus Quest, PlayStation VR or Microsoft HoloLens. Virtual content can also be projected onto room-sized screens, but wearable technology is far more popular and accessible.

Virtual reality is an emerging technology with the potential for widespread popularity and adoption. Many of us got our first taste of VR watching 3D films. But today, virtual reality has expanded into video games, training simulators, real-estate tours, online retail, architectural design and more.

Virtual reality stocks are from companies that design or produce VR software and hardware. Most of the big names in virtual reality are tech companies with budgets big enough to support a VR program — think Google, Microsoft and Sony. These companies don’t exclusively focus on virtual reality but have the resources and capital to devote to a VR program.

Virtual reality vs. augmented reality

Spend any time digging into the technology behind virtual reality and you’ll invariably stumble across augmented reality (AR). Like virtual reality, augmented reality also tweaks our interpretation of the world around us. But instead of immersing the user in a simulated environment, augmented reality simulates an artificial object in real space.

Augmented reality requires a screen to superimpose its artificial object onto what we observe. One of the better-known examples of this technology is utilized by the mobile game, Pokemon Go. Users open the game on their phone and use the camera built into their device to observe the world around them — with a simulated image of a Pokemon thrown into the mix.

Why invest in VR stocks?

Virtual reality represents a shift in how we interact with technology and our environment — and it’s gaining traction. After Facebook dropped $US2 billion on Occulus Rift in 2014, a number of other tech giants decided to make a play for VR tech, including Amazon, Apple, Intel and Google.

The market is poised for growth and the tech giants are in the game, many having taken big steps to flesh out their VR programs. A lineup of consumer headsets hit the market in 2016 and since then, apps, content and hardware continue to expand.

Beyond the potential for growth, Australian investors may be interested in the VR market for its growing list of practical applications. This is an opportunity to back technology you may actually use and benefit from — now and in the future.

Risks of investing in VR stocks

Virtual reality is becoming increasingly popular but there are investment risks to consider, including slow industry growth and the technology’s novelty status.

When Zuckerberg splashed big cash on Occulus Rift, he made a prediction about the potential of the VR market. And that investment hasn’t quite paid off — at least not yet. The industry is growing, that much is clear. But how long will it take to become truly profitable?

Experts anticipated that VR headsets would be all the rage when they first hit shelves. But for the most part, sales fell flat. The high price tag could have something to do with it — the Occulus Rift costs $US399 and the Vive Cosmos retails for $US699. Granted, there are cheaper options on the market, but as it stands, consumers need to be prepared for a hefty price tag if they want a high-quality VR experience.

The reality is, consumer spending is a huge slice of the VR market and in many cases, this technology is still seen as a novelty. Australian investors interested in VR stocks will need to be prepared to sit tight — for a number of years, potentially — while virtual reality evolves from novelty to necessity.

Virtual reality stocks

There are few pure-play virtual reality stocks — that is to say, there are few companies that focus on virtual reality technology and nothing else. To add VR technology to your portfolio, be prepared to invest in technology companies that do more than VR.

What ETFs track the virtual reality category?

Most of the ETFs that offer exposure to virtual reality stocks are based in the US, but here are some ETFs that track software and robotics companies.

  • BetaShares Asia Technology Tigers ETF (ASIA)
  • BetaShares S&P/ASX Australian Technology ETF (ATEC)
  • ETFS Morningstar Global Technology ETF (TECH)

How to buy virtual reality stocks

Eager to invest in virtual reality from Australia? Here's a quick breakdown of the investment process.

1. Research stocks

There aren't many pure-play VR stocks on the market, which means the first step in your research will involve identifying those tech companies with virtual reality programs.

When sizing up prospective VR stocks, take a look at the company's history. Startups have growth potential but can be volatile. Established companies offer more security but many are pricey to purchase.

You'll also want to make sure you understand what the company does and what its plans are for its VR program. Taking time to research the company you're interested in will help you make informed, targeted investment decisions.

2. Open a brokerage account

Next, you'll want to open a brokerage account in Australia. There are plenty of online brokerages to choose from, but no two platforms are the same.

If you're new to trading, explore the offerings of beginner-friendly brokerages, like eToro. If you've got some investment experience under your belt, opt for a platform with more extensive research tools, like Interactive Brokers.

3. Purchase stocks

After opening and funding your brokerage account, you're ready to select and purchase stocks. Search for the stock by company name or ticker symbol. Once you've found the stock you want to buy, enter the number of shares you'd like to purchase and submit the order.

You can track the performance of your investments by logging into your brokerage account.

Virtual reality market projections

The VR market was worth $US6.1 billion in 2020 and this figure is expected to rise to $US20.9 billion by 2025, reports Market and Markets. Over this period, the industry's anticipated compound annual growth rate (CAGR) is 27.9%, with the Asia Pacific market representing the largest portion of growth.

In the coming years, the biggest driver for the market will be gaming and entertainment-related head-mounted displays, which have a forecasted CAGR of 38.6% from 2020 to 2025.

Compare trading platforms

Before you can purchase VR stocks, you'll need a brokerage account in Australia. Explore your options below.

Name Product Standard brokerage fee Inactivity fee Markets International
eToro (global stocks)
US$0
US$10 per month if there’s been no login for 12 months
Global shares, US shares, ETFs
Yes
Zero brokerage share trading on US, Hong Kong and European stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
IG Share Trading
$8
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
Superhero share trading
$5
No
ASX shares, US shares
Yes
Earn up to 15,000 Qantas frequent flyer points when you transfer an exisiting balance or trade. Offer valid for all new and existing Superhero members until 28 February.
Pay zero brokerage on US stocks and all ETFs and just $5 (flat fee) to trade Australian shares from your mobile or desktop.
ThinkMarkets Share Trading
$8
No
ASX shares
No
Limited-time offer: Get 10 free ASX trades ($0 brokerage) when you open a share trading account with ThinkMarkets before 31 December 2021(T&Cs apply). $8 flat fee brokerage for CHESS Sponsored ASX stocks (HIN ownership), plus free live stock price data on an easy to use mobile app.
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
Finder Exclusive: Get 5 free stock trades and unlimited ETF trades until 31 Dec 2021, when you join Bell Direct. T&Cs apply.
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
Saxo Capital Markets (Classic account)
$5
No
ASX shares, Global shares, ETFs
Yes
Access 19,000+ stocks on 40+ exchanges worldwide
Low fees for Australian and global share trading, no inactivity fees, low currency conversion fee and optimised for mobile.
CommSec Share Trading Account
$10
$0 for ASX shares, US$25 for global
ASX shares, Global shares, Options trading, ETFs
Yes
Trade with Australia's largest online stockbroking firm.
Enjoy fast, simple and affordable trades, with market leading research and broker recommendations all in one platform
CMC Markets Invest
$11
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
SelfWealth (Basic account)
$9.5
No
ASX shares, US shares
Yes
Trade ASX and US shares for a flat fee of $9.50, regardless of the trade size.
New customers receive free access to Community Insights with SelfWealth Premium for the first 90 days. Follow other investors and benchmark your portfolio performance.
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage is the cost to purchase $1,000 or less of equities without any qualifications or special eligibility. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Bottom line

VR stocks represent an enticing investment opportunity, bolstered by a market on an upward trajectory and expanding the technology’s everyday applications. But while experts agree that virtual reality will continue to reach into our everyday lives, the process may take some time.

Before you invest, review your platform options with multiple providers to find the brokerage account best suited to your needs.

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