Diversification is the name of the game. What are crypto index funds? Should you invest in one? Will that be a better choice than sticking with Bitcoin? Maybe you should pick up some promising new altcoins. Right? You’ve heard stories of people making $50 000 with $300 starting capital. Which decision is the right one?
Whiskey, tango, foxtrot, I’m so confused
The world of crypto is seriously confusing. Imagine driving and having 30 signs all of which tell you where to go – and you have to drive the car in the right direction, otherwise, someone can get seriously hurt. That’s exactly what a normal crypto exchange looks like.
Despite the fact that it’s infuriatingly hard to learn where the heck you’re supposed to be going with all the indicators and corrections and weird shampoo-based figures even pro traders can’t spot half the time, people are still surprised that trading is difficult, underrated, and that a lion’s share of traders loses their money.
Well, Nominex decided to put the end to the struggle in the same way Bitcoin put an end to the global banking cartel.
We’re providing classy, sassy, but simple and user-friendly education on all things that actually matter. This blog will teach you essentials of trading, and if you can’t find what you need here, get in touch with us and we’ll provide articles you need. Nominex makes a point of building its business around the user.
You’ll find articles here about risk management, getting hard-forked, best strategies, parabolic SARs, and exactly how many times the RSI turns out to be right. In the unlikely event there’s something missing our educational program that is coming out soon will fill in all the gaps – guaranteed.
If you have any questions whatsoever, the support is always there for you.
Get to the point! What is a crypto index fund?
A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money. – Warren Buffet
So you want to be a trader, huh? We admire the ambition. Unless the AI, which is stupendously amazing at trading, wipes out traders completely, you’re asking probably the best question of all. A cryptocurrency index fund is a funky new way of taking dusty old trading and making it powerful, gorgeous, and fun. How?
Diversification is the foundation of trading and one of the most important aspects ever. You deserve better than losing your money if a bank goes “poo”.
Statistics confirm banks going broke at regular intervals, which you can confirm by googling “list of bank failures in the United States (2008–present)”.
For example, like Argentinians or Russians or Greeks you may find the bank refuses to give you your money back after a crisis. We have some heinous examples handy but just take our word for it – when your president tells you you have 4 hours before your currency is not accepted by banks anymore, it’s not pretty.
That’s why it’s considered best practice to divide your money into a tax account (because you’ll have to pay that anyway), children education, a retirement account, some cash, crypto, shares, and possibly precious metals. The more diversification, the better. If you put all your money on red – well, there is a reason why they say the only way to win in a casino is to buy one.
So you’ve got some cash, gold, maybe tinned fish in case things get seriously rough and you need real currency. All that will help if electricity gets turned off or for some reason you can’t get your money out of the bank.
But the same goes for everything else too. Crypto wouldn’t die if anything should happen to your usual channels. Bitcoin transactions can be transmitted using short-frequency radio waves. Paper wallets. Skype emoticons. Satoshi’s legacy will never die.
But what if you have all your money in Ether and boom – there’s nothing left? No currency goes to zero – but you could possibly see the price drop so much and so quickly (thanks, fear mongers and panic sellers) – that any crypto’s price is capable of collapsing faster than you can say “wait a sec”.
Smart traders (like you, since you’re reading this) diversify professionally, meaning they find a strategy that places their assets into a huge variety of stocks. A good example would be the famous S+P500, which has 506 different asset types. You buy the S+P, the experts in the fund manage it for you – and if one of the assets crashes, you’re in a much better position than war pilots before parachutes were invented. Because you’re purchasing half a thousand assets, if one part fails, you’re still getting a stable average income.
Your returns may not be as spectacular as buying Bitcoin in 2010 and selling it just before the Big Bad at $20 000, but there’s nothing wrong with stable return over time. Which is why they’re not a bad idea for retirement planning. And Bitcoin hodling so isn’t.
An example of an index fund at work is quoted below. Looks like it’s not doing so bad:
Index Fund Investor’s Risks
|Constant volatility in prices of individual cryptos that populate the fund||The demand and supply of cryptocurrencies are mostly fueled by speculation, and prices can change dramatically and unpredictably without warning|
|Lack of liquidity||The mere existence of a tradable currency does not necessarily guarantee cash convertibility. So don’t be expecting short-term gains|
|Possible regulatory changes||The anomalous regulatory framework and constant changes impact crypto pricing and spur currency volatility|
|Severe cyber threats||This is the practice of hacking your computer for the private mining of cryptocurrency without your knowledge or permission|
Is there a crypto index fund for me?
If you don’t want to risk it all alone, it may very well be that you’ve made the right choice. Probably a good idea to not try to perform heart surgery on yourself, and so logically a specialist would also be required to make things happen trading-wise. But which one to choose?
We trust in your ability to make the right decision, so we won’t push and instead just give you these two (pretty cute) choices.
What’s the best cryptocurrency index fund?
“In traditional financial markets, an index is comprised of a portfolio of assets which represents the statistical chance of the measured market. An index can be derived from a number of parameters such as price, market cap, and past performance. Examples of well-known stock indexes include Standard & Poor’s 500 Index (S&P 500), Dow Jones Industrial Average (DJIA), and the NASDAQ Composite. An index fund consists of assets allocated in the same ratio as the targeted stock index, with the goal of mimicking the stock index performance. For instance, the largest index fund in the world, Vanguard 500 (VFIAX), is constructed to track the performance of the S&P 500, and replicates its portfolio and asset ratios based on the stocks that make up the S&P 500.”
As you can see, Vanguard is one of the more famous choices. Low-cost, ridiculously low commissions, ETF trades – but rather limited functionality. Ideal for new traders and surfer dudes with a chill attitude to stress.
Fidelity Digital assets
Barron’s 2016, 2017, and 2018 Best Online Broker, Fidelity index mutual funds offer no commissions on stock, ETF or options trades, and, according to Nerd Wallet, “a swath of research offerings and an easy-to-use platform that also can be customized for more advanced traders, more than 3,500 no-transaction-fee mutual funds and top-notch research tools and trading platform. Its zero-fee index funds and strong customer service reputation are just icing on the cake”.
Despite its rather ambitious trade fees, it offers many more pros than cons and so is a much more interesting option to try after gaining some expertise in the market. Known for its research unlike the previous option, it also serves retirement planners well as much as active traders.
Cryptocurrency index funds
Let's see how attentive you were - did you pay attention to what you just read, or were you just thoughtlessly scrolling through the article? Time to find out!
Hopefully, now you have more of a clear idea of why buying a diversified portfolio is a better idea than betting all your money on one currency. Although if you’re kinda crazy (just a little) you can just go with BTC and see what happens. But then you’re either going to lose 25% of your salary for 3 years or see it multiple by 30 if Tim Draper was right. And he was right about a lot of things.
We personally don’t recommend it. But if there’s no adventure in your life…hey, we’ll stop giving you mixed messages here and leave with a recommendation to trade responsibly and be nice to your Nana. Money is fantastic, but we want you to also be happy, and that means having love, too.
Get a diversified portfolio on Nominex today!