How to diversify crypto investments – MarketWatch
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When it comes to investing, diversification is key. By spreading your wealth around, you’re less likely to suffer a major financial blow should one of your investments not pan out.
This is especially true for cryptocurrency, an asset class so new and often volatile that some financial advisors caution their clients to steer clear of it.
Jesse Proudman, chief executive of the crypto investment platform Makara, says that people interested in buying cryptocurrency might learn from wealthy “angel” investors. These buyers, who fund early-stage startups, are used to dealing with projects that may or may not succeed.
“When you’re angel investing, you make a lot of different investments, and many of them fail, some of them are moderately successful, and some of them are incredibly successful,” Proudman said. “It’s that combination that makes your portfolio compelling. Diversifying here is smart for this same reason.”
But the novelty of crypto makes diversification more complicated than it would be for more traditional investments, such as stocks. For instance, there are no widely available mutual funds offering broad exposure to the digital asset space.
Still, there are some strategies savvy investors can use to mitigate their risks.
Buying a fund
There are relatively slim pickings for people of modest means who are looking for the simplicity of a professionally managed fund. But a handful of products have emerged that seek to make cryptocurrency more accessible to people most comfortable with traditional investing tools.
An exchange-traded fund, for instance, can be held in a brokerage account or used as part of a retirement fund, unlike crypto on its own. But such funds also carry fees, and they offer investors less control over their digital assets.
ETFs can be an easy way for investors to buy into diversified portfolios of stocks and other assets.
As it stands right now, though, the Securities and Exchange Commission hasn’t approved an ETF that would hold Bitcoin
nor any that invest directly in other digital assets.
One ETF option for crypto-curious investors is a fund that focuses on cryptocurrencies’ underlying “blockchain” technology. Such funds buy the stock of companies with an emphasis on that sector. Those, however, are not direct investments in cryptocurrency.
The lack of fund options available …….