An index fund is an investment where funds are allocated in proportion to a constituent of the index. This may reduce volatility and the returns will be in proportional to the index.
However, this is not truly an index fund as it has limited exposure. The funds are allocated only in bitcoin, there,ethereum classic,litecoin and bitcoin cash. This announcement was made after the company committed to supporting Etherum Classic. Nevertheless, the fees are exorbitant and only the affluent can participate.
Coinbase under its asset management arm has rolled out this relatively new service.
This service was started as a solution for an institutional investor who could either due to fear or uncertain legal compliance was not getting access to cryptocurrency. The two benefits for institutional clients by taking this service is that they reduce their risk and increase the appearance of legal compliance
Reuben Bramanathan stated that the investment will be available only to Americans as they are accredited and they have to put up a minimum of $250000.
The qualifying norms are quite stringent. In order to qualify one must to have an income of $200000 or more or have a net worth of $1 million excluding the worth of your residence. This would effectively mean that only 1% of the earners would be able to invest.
The other factor to be considered is that one will have to pay 2% in fees whereas in a similar index fund called vanguard the fees are only0.04%
However, there is a silver lining for an investor who doesn’t meet above-mentioned eligibility. One can merely replicate the investment portfolio of this index fund. An investor could invest whatever amount but in proportion to the index fund. There is no restriction by the company on independent investors.
Investing independently has several advantages. First you need to pay very less fee relatively, second, you don’t have to pay the fee every year if in case you want to invest for many years.
Second, if you decide to run this fund yourself, you can do so while still maintaining total control of all of the assets within the fund. If security is a concern, all five of those assets are compatible with hardware wallets. This means you could set up the wallet, buy and transfer the funds and then forget about them until you’re ready to cash in
The investment in an index fund is a matter of personal choice. If one is not a very vigilant and active investor Index fund is a better option. However, if you are an active investor and have the knowledge you could manage the asset allocation based on the informed decision, which eventually may offer you higher returns
