Earn Higher Cryptocurrency Returns
Index Funds vs. Actively Managed Funds
Utilizing a managed index fund to invest passively will generally earn higher returns compared to investing in actively managed funds. In fact, according to CNBC, “Active managers didn’t fare well last year. About 80% of all actively managed U.S. stock mutual funds underperformed their benchmark in 2021, the third-worst showing in the past two decades, according to S&P Dow Jones Indices’ annual SPIVA report. Furthermore, “Just 26% of all actively managed funds beat the returns of their index-fund rivals over the decade through December 2021, according to a separate report published last month by Morningstar.”
While index funds for cryptocurrencies are relatively new, comparing index funds and actively managed funds as viewed through the scope of traditional finance will likely have the same or better results within the blockchain space. With new, emerging, and innovative investment opportunities in the crypto space, investing in an index is more important than ever, as results are consequences of decisions controlled by a human. In other words, emotions and distractions often hinder profits in an ever-increasingly fast-paced investment sector. Indexing can eliminate all the negative noise.
Benefits of a Cryptocurrency Index Fund
“Diversification is protection against ignorance,” as Buffett famously remarked. Relative to traditional investment options, investing in cryptocurrency is still in its infancy. Like many other investment opportunities with a short trading history, the likelihood of some investments falling to a zero valuation is a consideration to take when examining risk tolerance. Spreading out risk is the sensible way of combating substantial amounts of capital loss, as your allocations are not overly correlated to one project. 100x gains over a short period may sound enticing, but chasing a singular crypto investment of that nature will most often come at the expense of a ride to zero. Of course the rule of diminishing returns kicks in with too much diversification, and this is why using On-Chain Index (OCI) to pick the top crypto funds within each crypto sector is key.
Beyond diversification, we have to consider tax implications when entering and exiting investments. “I want to pay more in taxes,” says no one. Index funds typically have a lower turnover ratio, as they trade less frequently than actively managed funds. Less trading, in turn, will produce less short-term capital gain activity and lower tax liabilities compared to a higher frequency traded managed fund. More is not always better, and OCI strives for the most stable quality investments.
Start Investing with the Best Cryptocurrency Portfolio Manager
Not all index funds are created equal, and curating an index fund with promising returns is a small portion of the equation. OCI reaches well beyond a basic broad market index fund approach when selecting blockchain projects. OCI is the only company that uses theme-based asset indexes, which provide diversification in digital assets investment and capital growth opportunities through stable yield-producing products such as token staking and stable coin yields. The OCI investment team is highly innovative and they understand the current traditional finance benchmarks reflect past successes, and will not guarantee the future success of blockchain investments. The complexities of blockchain investments as an emerging asset class is why OCI does not remain idle in the quest for future growth. Beyond up-to-date research, we constantly re-examine all existing investments to ensure the specific indices best reflect current and future blockchain space developments.
