May 17, 2022 Digital
The buzz is that Asia’s first Cryptocurrency ETF is about to launch in India. This event will be the outcome of MoU between Torus Kling Blockchain IFSC and India INX. Is this not the enough reason to be aware of the basics of cryptocurrency mutual fund India? The event clearly marks new beginning and hints at the changing ways of investment in coming times. So, to help you stay future-proof in your way of making investments, explained here are a few basics to know about the crypto mutual funds.
What exactly is a Crypto Mutual Fund?
A mutual fund investor might clearly know that this kind of fund accumulates money from investors and earns for them the returns received from investing in various assets. These assets are mostly stocks, bonds, underlying securities, debt instruments, etc.
A crypto mutual fund India gets its inspiration from this product and offers a basket of assets represented by a single product to investors. The distinguishing feature of crypto mutual fund is that the investments are made in different kinds of cryptocurrencies or various cryptocurrency markets’ assets. Hence, the feature of diversification becomes easier to achieve with crypto mutual funds.
Pros of crypto mutual funds
One can invest in crypto mutual fund more easily than in a cryptocurrency. The existing brokerage account can be used to invest in these funds. You need not make special arrangements to start investing in it.
These mutual funds can be saved in a retirement account. It is possible to treat these funds same as the funds with tax benefits.
The regulation of crypto mutual funds is top-notch. It safeguards the interest of investors quite significantly.
The investors can do the balancing of the portfolio rather easily because all mutual funds are held in a single account. Hence, crypto wealth manager can provide full view of the performing and non-performing funds and can help make decisions regarding switches rather easily.
As of now, the focus of Crypto mutual fund is Bitcoin. Since Bitcoin is quite a promising cryptocurrency and has helped create wealth, the crypto mutual funds prove to be a lucrative investment option.
Cons of crypto mutual funds
One cannot predict the performance of a crypto fund based on that of constituent cryptocurrencies. There can be conspicuous difference in their individual performances, especially in case of futures-based crypto mutual fund. Hence, the risk is not 100% eliminated.
The high trading cost can reduce the margins. It is estimated that the cost may go over 1%.
The liquidation window is limited as the trading is allowed only once in 24 hours; on the contrary, the cryptocurrencies are traded all hours of the day. It is one of the reasons behind the difference in the performances of crypto mutual funds and cryptocurrencies.
Research is the most trusted tool when one wants to diversify investments to newer avenues like crypto mutual funds. Hence, read a lot about them, follow their pricing patterns and the factors that influence their performance. You can also take help of crypto wealth manager to understand the costs, risks and possibilities of earning money available in these mutual funds.