Motley Fool: Compelling metaverse pioneer

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 increased 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

Q. Should I contribute to a 401(k)? – S.C., Kenosha, Wisconsin

A. 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.

Q. What’s a trust? – M.N., Miamisburg, Ohio

A. 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.

My dumbest investment

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. – R., online

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.