Things To Know Before Investing In Crypto Index Fund In India?

May 17, 2022 Digital

The cryptocurrency market is flourishing day by day with the introduction of newer and more interesting products. What started with the introduction of Bitcoin merely and an overview of blockchain method has become a promising avenue for investments. To keep the investors’ money safe, modes of diversification are offered. It has led to the discussions on crypto mutual fund India and different other products. 

What is Crypto Index Fund?

For the uninitiated, the Crypto Index Fund is a pool of different cryptocurrencies clubbed under a specific index. The constituents of the index fund are selected based on investment objectives. It is similar to the index of stocks where the investment in made in companies’ stocks. The crypto index fund India is in development stage and very few options have come into form. One such fund is a combination of Blue-chip crypto assets. 

Process of investing in Crypto Index Fund 

The process of investing in Crypto Index Fund India is simple. A lot of homework is done in advance by the crypto wealth managers. They research on the large group of crypto assets. By matching the crypto assets’ features with the investment objectives, the experts filter the options and provide an investment alternative. One such index is that of blue chip crypto assets. 

Steps for investing in Crypto Index Fund include:

1. Pick the product from the list
2. Fund the crypto trading account
3. Allocate fund to the chosen product or scheme
4. Let the fund grow and scoop profits by raising a request for withdrawal
5. Keep a close eye on index movements and follow strategies to diversify to reduce risk

It is worth keeping in mind that the investment in Crypto Index Fund attracts an expense ratio. This ratio is percentage of the amount invested in underlying assets in the index fund.

Example of Crypto Index fund 

For better understanding, the crypto index fund clubs the portions of cryptocurrency markets. One of the established examples of crypto index fund is Bitwise 10 Crypto Index Fund. Instead of investing in all cryptocurrencies individually, the ease of investing in a club of those make the process easier, faster and diversified. Hence, Crypto index fund allows investors to put money into crypto assets but indirectly. Bitwise 10 focuses on 10 best cryptocurrencies picked on the basis of market share size. 

A few of the index funds are available as index tokens too. Examples are:

1. DeFi Pulse Index: It tracks performance of DeFi industry’s tokens.
2. Crypto20: It includes top 20 companies based on market capital size
3. NFT Index: This comprises digital assets of the non-fungible tokens or NFT industry.

How crypto mutual fund and crypto index fund differ

The Crypto Index Fund is actually a type of Crypto Mutual Fund India. It pools all investor funds. The index fund invests in crypto indexes and earns the investors a lot of profit by cashing the volatility of the indexes. There is no fund manager available for index fund.

Summing up,

While the Crypto Mutual Fund India is a collection of cryptocurrencies, the crypto index fund pools in the crypto indexes or a part of cryptocurrency markets. Learn all about these before signing up for investments to understand the risks involved and to make suitable investment decisions.