The metaverse is a virtual world that allows people to participate directly in online experiences. Roblox (NYSE: RBLX) has established itself as an early leader in the metaverse space, with the potential to become one of the biggest players in entertainment and social media.
Roblox is a platform housing a range of individual games and social opportunities, and it adds content regularly. Participants earn in-game currency that can be exchanged for real-world money based on user interactions with their creations. These incentives have helped supply a steady stream of high-quality content capable of keeping current users engaged and attracting new ones.
First launched in 2006, Roblox has increased engagement and monetization. The average number of active users on the platform daily rose 22% year over year in the first quarter, reaching 66 million, while revenue climbed 22% year over year, to $655 million.
Roblox is likely years away from profitability, as it’s still spending a lot of money in order to grow. It does have a strong balance sheet, though, having ended the first quarter with roughly $2.1 billion in cash, cash equivalents and investments net of debt. It looks like a buy-and-hold stock for long-term, growth-focused investors to consider. (The Motley Fool owns shares of and has recommended Roblox.)
Ask the Fool
From S.C., Kenosha, Wis.: Should I contribute to a 401(k)?
The Fool responds: Certainly consider it if your employer offers one. As with IRAs, there are both traditional and Roth 401(k) accounts, and the 401(k) contribution limit for 2023 is a generous $22,500 (with an additional $7,500 allowed for those 50 or older).
With a traditional 401(k) or IRA, your taxable income for the year may be reduced by the amount of your contribution for the year, shrinking your taxes. Roth accounts offer no upfront tax break, but let you withdraw money from the accounts tax-free in the future, if you follow certain rules. Withdrawals from traditional accounts are often taxable as ordinary income.
It’s common for employers to set your initial contribution level fairly low (for example, 3%), so be sure to increase that rate if you can — and consider upping it annually. Many employers also match some or all of your contribution, so aim to contribute enough to at least max out the match — that’s free money!
Money in your 401(k) can usually be invested in a variety of stocks, bonds and funds. Low-fee, broad-market stock index funds, such as funds based on the S&P 500, are great for long-term money. You might balance that with some bonds, too, especially as you approach retirement.
From M.N., Miamisburg, Ohio: What’s a trust?
The Fool responds: It’s a legal arrangement in which a “grantor” gives control of property to a person or an organization (the “trustee”) for the benefit of a third party (the “beneficiary”). The beneficiary owns the property, but the trustee controls it — usually for a limited period (such as until the beneficiary reaches a certain age). Trusts are often part of estate plans.
The Fool’s School
If you’re planning to buy a home in the near future, consider making these smart moves first.
For starters, aim to get as high a credit score as you can, because lenders offer the best (lowest) interest rates to those with high scores. Credit scores generally range from 300 to 850, and mortgage lenders often require a score of 620 or more. To boost your score, you can pay bills on time, pay down debts, avoid applying for new cards and fix any errors in your credit reports. (You can get free copies of your credit reports via AnnualCreditReport.com.)
Next, research the many kinds of mortgages you might get. There are fixed-rate ones and adjustable-rate mortgages (ARMs). Fixed-rate loans are best when interest rates are low; ARMs can be smart if rates are high and expected to fall, or if they offer a low locked rate for as long as you plan to be in the home.
Mortgages are commonly for 15 or 30 years, but you might be able to snag a different term, such as 20 years. Longer terms mean lower monthly payments, but you’ll pay much more interest over the life of the loan. A good strategy is to get a 30-year loan with no penalties for prepayments. That way you can pay more than your monthly obligation whenever possible, shortening the life of the loan and reducing the total interest charged.
Once you find a lender offering you the best terms and start house-hunting in earnest, get preapproved — not just prequalified. Being prequalified generally means you told a lender some financial information and got an estimate of how much you can borrow. Getting preapproved means the lender has verified your finances and has made a conditional commitment to lend you a certain sum. You’ll be seen as a more credible potential buyer if you make an offer when you’re preapproved.
Learn more about mortgages and homebuying at our sister site, TheAscent.com, and at the U.S. Department of Housing and Urban Development’s website, HUD.gov.
My Dumbest Investment
From R., online: My most regrettable investing move was taking a cold call many years ago. I ended up throwing away $5,000. Lesson learned: Never buy on a cold call tip.
The Fool responds: You certainly learned the hard way how dangerous cold calls can be.
Some cold calls are not that problematic — they’re simply someone trying to drum up more business of a legitimate sort. But many other cold calls are from people without good intentions who are trying to pressure you into making some sort of “investment.” They push hard, often presenting false information, and urge you to act immediately to not lose out on what’s described as a “sure thing.”
Those kinds of cold calls can be part of “boiler room” schemes, which government entities have been warning investors about for years. A boiler room scheme might also involve emails, texts or online messages, all trying to get their targets to invest in something. These scammers often promise high returns and little to no risk. They may even threaten you with trouble if you don’t cooperate.
To protect yourself, never invest in anything you hear about via an unsolicited cold call or other message, especially if there are red flags such as urgency, high pressure or threats. Do plenty of research first — or, better yet, just hang up.
Who am I?
I trace my roots back to the 1966 founding of a store in St. Paul, Minn.: The Sound of Music sold stereos, vinyl records and more. By 1993, I was the second-biggest electronics retailer in the U.S. Recently I had a market value of $18 billion and boasted more than 1,000 stores and about 100,000 employees in the U.S. and Canada. I sell refrigerators, televisions, laptops, smartphones, headphones, guitar amplifiers, desks, electric bikes, home security systems and more. Don’t call my home service technicians “dorks” or “nerds.” I rake in more than $45 billion annually. Who am I?
Can’t remember last week’s trivia question? Find it here.
Last week’s trivia answer: Tesla
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