How to Take Advantage of New Investment Opportunities like Cryptocurrency Funds
Growing up is scary. Going from not having a care in the world to taking care of everything yourself can be a daunting task. Just paying the bills and buying groceries is enough, but when you start to think about savings and investment portfolios, the adult world can become overwhelming.
There’s your retirement fund—known as a 401K—at your job, of course. However, understanding how your 401K makes money can be a little confusing. Once you start thinking about how to invest your savings without help, personal finances can become a formidable proposition.
According to NerdWallet, over 60 percent of people 18-34 are opting to use savings accounts to set money aside for retirement. If they set enough aside each month, they may still be in good shape come retirement. But if they invest, they could be significantly better prepared.
If you are a risk-averse millennial that fears another stock crash like the mortgage crisis in 2008, technology may have an intriguing solution. The rise of cryptocurrencies such as Bitcoin, as well as safe ways to invest in them has led to an intriguing financial opportunity – cryptocurrency-based investment funds.
What Is A Cryptocurrency?
To explain what a cryptocurrency fund is, it is important to first understand the breakdown of the assets in the fund’s portfolio. Investing in cryptocurrencies such as Bitcoin, Ethereum, Ripple, and Dash is very similar to investing in currencies. People can use them for buying and selling and can invest in them as they would US Dollars or Euros. However, unlike their traditional counterparts, these cryptocurrencies have a limited supply, and they have to be “mined” in order to be used.
Bitcoin became the first mainstream decentralized cryptocurrency in 2009. Since then, several others including Ethereum, LiteCoin and Dash have become increasingly popular, attracting new traders and investors thus increasing the overall market cap significantly.
What Is A Cryptocurrency-based Investment Fund?
The easiest way to describe a cryptocurrency-based investment fund is to compare it to its traditional counterpart, the classic investment fund. In a traditional fund, your money is allocated between several different investments. Some entail more risk than others, which of course brings more reward. The growth of your equity depends on the volatility of the market and the type of investments that make up the fund.
Cryptocurrency funds operate in a similar fashion. eToro’s Crypto Copyfund, for example, is based on a diverse portfolio, currently allocating different percentages to six different cryptocurrencies (Bitcoin, Ethereum, Litecoin, Ripple, Dash, and Ethereum Classic), currently led by Bitcoin, and rebalanced on the first trading day of each calendar month.
This fund focuses on cryptocurrencies with a market cap of at least $1 billion (with a roundup of up to 2%) and a minimum average monthly trading volume of $20 million. The weight of each of the CopyFund’s components is decided according by market cap, with a minimum of 5%.
Other funds, such as those offered by Metis Management, prefer a more diversified investment portfolio, reserving part of their capital to invest in newer, more radical digital currencies.
As cryptocurrencies have gained in popularity, cryptocurrency investment funds have opened the doors to respond to the increasing demand to trade these digital assets in a more regulated way. With several cryptocurrency exchanges operating around the world, cryptocurrency investment funds offer investors a relatively safe method to invest or trade in digital currencies and increase their exposure to a potentially high-value asset class.
Are Crypto CopyFunds Worth the Investment?
With most new investment trends, it helps to be in on the ground floor. While cryptocurrencies have reached a new phase in their maturity as an investment asset, it’s still possible to get excellent returns investing in them. The top 100 cryptocurrencies have already surpassed $100 billion in value, with Bitcoin accounting for the lion’s share.
While they still hold more risk than traditional currencies and other assets, cryptocurrencies are becoming an established opportunity to diversify any investment portfolio. The value of each might remain volatile, but the popularity of cryptocurrencies is expected to continue to increase.
Cryptocurrency investment and copy funds such as eToro’s can help investors mediate risk by providing a diversified and transparent way to spread capital amongst the best-performing cryptocurrencies for the highest returns.
In addition, since this is a managed fund that updates on a monthly basis with the top cryptocurrencies, it provides a solution for investors interested in diversifying their portfolio with cryptocurrencies, but lack the time or knowledge to capitalize from them.
While cryptocurrency prices will undoubtedly fluctuate in coming months and years, finding a way to safely invest and have exposure to one of the fastest-rising investment trends is a vital for forward-thinking traders.