Make it easy on me: how to invest into cryptocurrency even if you have no idea what you’re doing
If you believe the headlines, it seems that everyone and their 14-year-old is making money from crypto and Bitcoin; words and concepts that ironically, did not even exist 14 years ago.
If you want to jump on the crypto bandwagon, without taking time to understand all the acronyms (FUD, FOMO, HODL) or crazy terminology about moonbois in lambos, then take note.
From the 1400’s to the 1960’s, stocks and shares were also a mysterious concept: spoken of in hushed tones by the 1% elite whilst clutching cigars and cognac in their oak-panelled private clubs.
The billionaires’ best-kept secret was shattered forever by a benevolent philanthropist called Jack Bogle, who believed that “investing is for everyone”.
Bogle decided that he wanted to create an easy way for the other 99% of people to invest into stocks, so he launched Vanguard, the world’s first stockmarket mutual fund. This mutual fund was an investment vehicle where thousands of people could invest their spare change into a large pool, and the pool would be invested into the stockmarket.
If the stockmarket went up 10%, every mutual fund investor would gain 10%, regardless of whether they had invested $100 or $100 000. The billionaire elite scoffed, but Bogle and the rest of the 99% had the last laugh. Thanks to Jack Bogle, most people are now familiar with index funds or mutual funds, and the majority probably have their retirement money in a similar pool.
There are now hundreds of thousands of different stock markets mutual funds all over the world, controlling over $55 Trillion, or over 85% of the world markets. As competition has ramped up, barriers to entry have come down, and some stock mutual funds will even allow you to invest with $1.
Cryptocurrencies are a much newer market, and as they are unregulated, they can be quite volatile and dangerous for new investors. Crypto is as famous for creating millionaires as it is for losing fortunes, as scams abound.
Fortunately, some enterprising folk have decided to democratise crypto for the masses, just as Vanguard did for stocks. Investing into a crypto mutual fund can be just as easy as investing into a stock mutual fund (but more volatile). As they say in crypto markets, “If you cannot handle the 50% drops, you will not get the 500% gains”. Many financial advisers suggest that crypto investments should make up only 5–10% of your entire portfolio due to their inherent volatility.
If you are aware of the warnings and still wish to proceed, below are a few examples of companies who offer a “Done For You” crypto service.
· Grayscale. Grayscale offer a few “monofunds” which invest into only one asset; for example, the Grayscale Bitcoin Trust, or the Grayscale Ethereum Trust. These funds can be purchased as easily as regular stocks, without having to complicate things with crypto wallets, seed phrases and so on. The downside is that with only one asset in the fund, if it goes down, there is nothing to bring it back up again. Compare it to investing all your money into one single stock and hoping that it beats the market.
· Crypto20.com: the home of the Top 20 Crypto Index, which does what it says on the box. You invest into the pool, they buy the top 20 cryptocurrencies on your behalf. This provides a little more portfolio protection; if one coin drops significantly, you still have 19 more chances to be OK. Compare it to investing into a tech index fund.
· The Woodstock Fund: a diversified crypto fund which invests into blockchain infrastructure, NFT’s, Web3.0 and DeFi. You do not need to know what these things are to benefit. Basically, they invest into 30–40 projects, spreading the risk.
· Novum Alpha: a complex diversified crypto fund with a long-short strategy. This means that you can potentially make money even when markets go down. Minimum investment US$100 000, performance fee 30%.
· Bitwise.io: a simple Top Ten fund with no performance fee, however, returns have been around 25% lower than Bitcoin over the last few years.
· Pantera: 15–25 different crypto assets provide better diversification. Minimum US$100 000 investment with 20% performance fee. Returns have averaged 2% pa over four years or slightly worse than a stock index fund.
· Bostoncoin: a diversified fund that includes 30–40 different cryptocurrencies as well as some tech and blockchain-related stocks. Bostoncoin claims to be the world’s first diversified crypto fund, since 2016. Minimum investment US$10 000 (individuals) minimum US$50 000 (family trust, 401K, Roth IRA) and 0% performance fee. Fund disclosure updated monthly on site and in the free newsletter. Bostoncoin has outperformed Bitcoin for over four years in a row, with an average performance of 366% pa (vs BTC 62% pa) since January 2018.
New crypto funds may join the marketplace soon, just as thousands of new funds were released after Vanguard broke the stock market access barrier. Even though you are allowing a professional manager to look after your funds, scams may still be prevalent whilst there is no legislation. All investors, whether going “DIY” or using a fund manager, are advised to spend an hour on research before they invest a dollar that they may not get back.
Jeremy Britton DFA SAFin, financial planner 20+ years, crypto geek 7+ years. Best-selling economic author on Amazon. Jeremy Britton owns Bitcoin, ETH, Bostoncoin and several other cryptocurrencies.