Are you interested in gaining broad exposure to a portfolio of digital currencies?
One way of doing this is to purchase the index share class offered by Crypto Asset Fund (CAF), a fund managed by Crypto Asset Management, which was founded by record-holding investment manager Tim Enneking.
(Be sure to check out our guides on Class T shares and Class L shares offered by Crypto Asset Management as well!)
CAMCrypto30 Index
These Class I shares passively track the performance of the CAMCrypto 30 Index, which includes the 30 largest digital currencies by market capitalization.
This index’s value is updated in real-time, and it is re-weighted at the end of every month.
Indexing’s Appeal
While there are countless financial instruments out there, index funds, in general, have repeatedly received high praise from Warren Buffett, one of the world’s richest investors.
“Consistently buy an S&P 500 low-cost index fund,” he told CNBC during a 2017 interview. “I think it’s the thing that makes the most sense practically all of the time.”
While Buffett has made his fortune by focusing on the stock market, his fondness for indexing can be applied to other asset classes.
Through index funds, you can easily gain exposure to a diversified portfolio of assets and do so at a low cost.
However, what might be far more helpful at this point is a few tips on how best to use these funds.
Fortunately, there are a handful of strategies that may prove helpful to the typical investor.
Buying The Dip
If you want to try your hand at timing the market, you could make an effort to “buy the dip” or purchase Class I shares after the index has fallen in value.
The digital currency market is highly volatile, so there will likely be significant opportunities for those who are willing to wait.
However, doing this effectively can be difficult around the end of the month, as the index goes through its regular re-weighting.
The shares also have monthly liquidity, meaning that you can only purchase – or sell – its securities once a month. However, Enneking has indicated that Class I shares will soon have weekly liquidity, easing this problem.
Dollar-Cost Averaging
Another potential strategy that investors can use is dollar-cost averaging, which involves purchasing fixed amounts on a regular basis.
For example, if you wanted to invest $20,000 into the CAMCrypto30 Index using Class I shares, you could make a $2,000 purchase every month for 10 months.
Alternatively, you could make these purchases on a weekly basis, once the liquidity period shortens.
This approach is the exact opposite of timing the market, and it can help you even out the impact that temporary market volatility could have on your returns.
Buy And Hold
Leveraging a buy and hold strategy means purchasing an asset and then holding it over a long period of time.
If the digital currency space continues to grow, a buy and hold strategy could prove quite lucrative.
In addition, using this approach – as opposed to making regular trades – can help you reduce your costs by lowering brokerage fees.
Summing It Up
If you are interested in obtaining low-cost exposure to a portfolio of digital currencies, CAF’s Class I shares may be a great option. Keep in mind that risk is inherent to investment. Follow the standard investment advice that you should not invest more than you can afford to lose.
Before you invest in anything, be sure to conduct your needed due diligence. This should include not only thoroughly vetting any opportunities but also checking out any potential competitors to see if there is a better option.
Further, keep in mind that Class I shares are only open to accredited investors in the United States. The manager has also created an offshore feeder fund for non-U.S. investors.
For more information on digital currency investing, subscribe to Bitcoin Market Journal.
