What is an index fund?
An traditional index fund is made up of stocks/ bonds and is designed to reflect a market index. Index funds usually invest in the components that make up the index they track. Well-known index funds include the S&P 500 or the Dow Jones Industrial Average.
A cryptocurrency index fund follows the same model, but tracks digital assets rather than stocks and bonds.
Why would you want to invest in an index fund?
Simplicity: For those who don’t have time to closely monitor the crypto market, investing in an index is often seen as one of the simplest ways to diversify an investment portfolio. Anyone can invest their funds in an index, gain exposure to a diverse array of assets, and access competitive performance. Investors also need little experience to invest in an index.
Cost-efficiency: Investing in an index can also be more cost-efficient compared to buying each asset separately.
What are the risks?
As with all investments, investing in an index fund is not without risk. The index will fluctuate in value as tokens are bought and sold. So, it’s important to be aware that you could potentially lose your initial investment.
Also, note that it is possible to over-diversify. If your portfolio is over-diversified you may not get the full upswing. If one asset increases by 10X and the others don’t, you won’t get the 10X return you’d receive if you’d made an individual pick.
You can get overall greater returns with individual investments, however, indexes do tend to outperform the overall market.
Crypto Index Funds
Metaverse Index (MVI)
The Metaverse Index (MVI) is an index created by Index Coop and is a portfolio of tokens designed to reflect the movement of business and cultural fields toward a virtual, metaverse environment.
The top crypto exchanges for investing in Metaverse Index Stocks include Uniswap (V3), Uniswap (V2), and Hoo.
The MVI currently holds the following tokens:
Illuvium (ILV): is creating what is thought to be the first AAA game built on the Ethereum blockchain.
Axie Infinity Shards (AXS): is the governance token of Axie Infinity, the leading play-to-earn game.
Enjin (ENJ): is the token that powers Enjin’s NFT ecosystem, which allows businesses to develop, monetise and trade gaming NFTs.
Decentraland (MANA): the native currency of Decentraland, the decentralised metaverse world.
The Sandbox (SAND): the token behind The Sandbox, the platform that allows players to create and monetise on-chain games.
WAXE (WAXE): a dedicated e-commerce blockchain that enables NFT value transfer for major gaming studio partnerships.
Audius (AUDIO): Audius is a music streaming protocol that links content creators and their fans.
Ethernity Chain (ERN): the token used by collectors to farm rare NFTs on the Ethernity Chain platform.
NFTX (NFTX): a protocol used to create ERC-20 tokens backed by NFT collectibles to unlock liquidity.
Terra Virtua (TVK): Terra Virtua is a platform that facilitates the trading of digital collectibles/
Rarible (RARI): Rarible is an NFT marketplace where users can mint, buy, and sell digital items and collectibles.
WHALE (WHALE): WHALE is a currency underpinned by rare NFTs held in the WHALE Vault.
Decentral Games (DG): is a Metaverse Casino in Decentraland.
REVV (REVV): an ERC20 token that supports play-to-earn motorsport blockchain games created by Animoca Brands.
Muse (MUSE): the protocol NFT20’s governance token that enables the tokenisation of NFT assets, allowing them to be traded on decentralised exchanges.
Meme (MEME): a meme coin that’s become a decentralised protocol for farming NFTs.
DeFi Pulse Index (DPI)
The top crypto exchanges for investing in the DeFi Pule Index include UniSwap (V3), UniSwap (V2), KuCoin, AEX, and CoinW.
The DeFi Pulse Index is an index that follows the performance of DeFi assets across the market. The index is weighted in proportion to the value of each token’s circulating supply.
The DPI currently holds the following tokens:
Uniswap (UNI): a popular decentralised trading protocol that facilitates the automated trading of DeFi tokens.
Aave (AAVE): a DeFi protocol that enables the lending and borrowing of crypto.
Loopring (LRC): an Ethereum-based token designed to facilitate the building of decentralised crypto exchanges.
Maker (MKR): the governance token of MakerDAO (decentralised organisation) and Maker Protocol (software platform).
SushiSwap (SUSHI): a decentralised exchange that utilizes smart contracts.
Compound (COMP): a DeFi lending protocol that enables users to earn interest on their crypto.
Synthetic (SNX): a DeFi protocol that offers on-chain exposure to a range of assets.
Yearn.Finance (YFI): a DeFi service that allows users to maximise profits through yield farming.
Ren (REN): a protocol designed to provide interoperability between different blockchain platforms.
Rari Governance Token (RGT): the governance token of Rari Capital, a DeFi robo-advisor that autonomously earns yield.
Balancer (BAL): an automated market maker (AMM) developed on Ethereum.
Badger DAO (BADGER): a decentralised automated organisation that builds products to simplify the use of Bitcoin as collateral.
Kyber Network Crystal V2 (KNC): a hub of liquidity protocols designed to offer easy access to liquidity pools at the best rates.
Harvest Finance (FARM): a platform that automatically farms the highest available yield from new DeFi protocols.
Instadapp (INST): a platform that enables users to manage and build their DeFi portfolio.
Vesper (VSP): A DeFi platform that offers access to high yield opportunities.
mStable Governance Token: Meta (MTA): a stablecoin infrastructure on which DeFi applications can be built.
Investing in index funds is often considered a relatively simple way to get involved with crypto. However, it’s important to proceed with caution and make sure to carry out the same extensive research you would with any other investment.
Disclaimer: NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.