What is a cryptocurrency mutual fund?

A cryptocurrency mutual fund is an investment programme that is funded by shareholders and is professionally managed

Cryptocurrency mutual funds are not as well-known as traditional investment funds, but that doesn’t mean they are any less important.

In traditional terms, a mutual fund is a professionally managed company that pools money from many investors and invests that money into securities such as stocks or bonds. In the case of cryptocurrency mutual funds, it would be exactly the same, but investing in cryptocurrencies instead of stocks.

Cryptocurrency mutual funds make it easy for new investors to navigate this new market. In simple terms, a mutual fund will buy and trade a coin instead of the investor directly purchasing and trading them.

Why use a mutual fund?

From shares to commodities, investment funds have always provided exposure to asset classes. However, they are more of a recent phenomenon in the world of cryptocurrencies. There are several reasons why investors may consider buying crypto through mutual funds.

Expert management  

One advantage of a mutual fund is the benefit of having expert management. Having this allows investors to hand control of their portfolio over to a professional. This then enables them to have more free time as they do not need to dedicate their time and effort to researching different currencies and watching the market. Instead, investors can let the experienced fund manager make all the decisions and do all the hard work.

Avoiding confusion

This leads on to the second benefit of mutual funds, which is reducing and even avoiding any crypto confusion. If you’re new to cryptocurrencies, it can be hard to understand all the terms and how they work. However, using a crypto fund avoids the hassles of transacting on exchanges and dealing with the risks of hackers and theft.

Increased buying power

Using a mutual cryptocurrency fund offers increased buying power for investors. This is due to the higher capital amount being invested. A crypto fund can reach digital currency funds that are out of financial reach for individual investors. It is also more cost effective to have a mutual fund and easier to maintain a diverse portfolio.

What are the risks of investing in mutual funds?

Just like all types of investments, there is a certain level of risk when investing in crypto funds. Some of the factors you as an investor will need to look out for are:

  • There is a risk of loss of control when handling all of your investments over to someone else, and this becomes a large stumbling block for many.
  • Volatility is also a large risk. However, this is a risk with cryptocurrencies in general. If you’re someone who is looking for a stable investment with low risk, then a mutual crypto fund may not be for you.
  • Fees are also something to be aware of when investing in a mutual fund. You need to make sure you are fully aware of all the costs before you sign up as this may impact your returns and losses.

First Block Capital  

First Block Capital is a Canadian crypto and blockchain investment company. It is the first of its kind to have launched in Canada and achieve mutual fund status. It allows investors to place funds in registered accounts such as a tax-free savings account or a registered retirement savings plan.

The company was launched late last year with the trust being made available on distributed platform NEO Connect. It is available to accredited investors only. Advisors can then trade the fund with the same ease as trading with ETFs.

The trust gives investors exposure to Bitcoin without having to hold or manage actual Bitcoins. It has also been approved by the BCSC and marks the first and only product approved of its kind in Canada.

Final thoughts  

Whilst the rise of cryptocurrency funds is good news for digital assets, it is important to remember all of the risks and do your own research before committing. With this in mind, by reading this article, hopefully you now have more of an idea if you are wanting to invest in a cryptocurrency mutual fund.

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