Crypto index funds offer a convenient way to invest in the cryptocurrency market, but they may not suit every investor’s style and goals.
There are thousands of cryptocurrencies out there, with hundreds being created daily to fill every potential gap in the market. While this means there are limitless opportunities for investors, it also means there are many challenges to navigate, including which cryptocurrencies to invest in.
Most cryptocurrencies end up being abandoned after failing to catch on, but others thrive and see their holder numbers grow over time for a variety of reasons. Fear of missing out, or FOMO, is, therefore, a big part of the cryptocurrency investor’s mindset, and while Warren Buffett says we don’t have to swing at every pitch, investors are always looking for something.
One tool investors have at their disposal is crypto index funds, which offer exposure to several digital assets through a single investment vehicle, effectively scaling down the risk associated with investing in a single cryptocurrency. These funds track the performance of specific digital assets — which are determined by different factors like market capitalization or theme — and follow a particular weighting and rebalancing strategy to decide which coins comprise the fund.
