Compare the best Bitcoin funds in 2022
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This beginner’s guide takes you through the basics of a crypto fund and why you might want to own one. You can compare the top funds, and get your key questions answered right here.
What are the top Bitcoin funds?
The table below includes the best funds that you can invest in right now. At the moment, there aren’t too many of them that are appropriate for the average investor, as they require a large minimum investment (at least $10,000, often closer to $100,000) to allow you to join.
There are more funds being created all the time, however. Check back regularly to get the latest on the best funds available, or read on to find out what’s out there today.
What is a Bitcoin fund?
A fund is a pool of money from lots of different investors. Funds are managed by a professional, who decides when to invest and where to put the money in order to generate the best returns for everyone. A fund’s holdings might include some Bitcoin, some shares in companies that work in crypto, or a combination of both.
To gain access to the fund, you simply buy a share or ‘unit’ in it. You can do this through your broker. The price of a fund is based on the total value of everything it owns and is calculated at the end of every day. Every time someone buys a unit, their money is added to the pool.
What should I look for in a fund?
There are lots of factors to consider and it often depends on how long you intend to invest and how much risk you’re willing to tolerate. These are the most important things to consider regardless of your time frames.
Low maintenance fees
Funds often come with a number of different charges and you should look for the lowest ones you can find. You might have to pay an annual management or maintenance fee, a performance fee, and a fee for withdrawing your money (known as a ‘realisation fee’).
As all Bitcoin funds are going to own similar assets, choosing the fund with the lowest fees is likely to save you money in the long run. If the fund owns shares in companies that operate in crypto along with owning Bitcoin, then there is more potential for some managers to perform better than others, but it’s still usually wise to favour one with low fees.
A history of good performance
Previous performance can be a good indicator of how good a fund’s management is. This is not a guarantee, however, as it could just be a fluke of luck and timing that one fund did better than another. However, you should be wary of any fund that shows consistent underperformance compared to the market as a whole.
Daily trading volume
The more trading volume there is in the assets that a fund owns, the better as that means it will always be able to make trades and cash out to take profits. Holding lots of illiquid stocks or assets could be an issue if the fund gets stuck with it during a fall. There is a huge amount of volume around Bitcoin, but it’s worth thinking about for a fund that owns stocks and shares.
Ideally, you want a fund that holds lots of different assets. Obviously, with a Bitcoin fund this isn’t as easy, but you have to be willing to accept that your investment might be extremely volatile. A less risky fund might hold a few different cryptocurrencies, or shares in companies that operate on the blockchain along with Bitcoin.
Bitcoin funds are often geared towards institutional investors, which means they can be expensive to join. You might need to commit a fixed amount – say $25,000 – or to prove your income is above a certain level to be able to invest. Shop around to find one that is more suited to your budget if you don’t have that level of cash to hand.
Quick answers to key questions
Do I have to pay to use a fund?
You will have to pay some fees as part of owning a share in a fund. Your broker might charge a fee or commission when you buy the shares initially, and there are ongoing management fees that usually cost about 1-2% annually.
What’s the difference between a fund and a trust?
They are very similar but the main difference is that a fund is ‘open-ended’, while a trust is ‘closed-ended’. That means that there is no maximum amount of money in a fund, as it just keeps creating new shares or units. In a trust, the total is set and to gain access to it you have to buy a share from another investor.
Because of this, the fees a fund charges are usually higher than a trust. It requires more active management and has to make more trades. Every time a new person joins the fund (or ‘realises’ their investment by withdrawing their money), it has to buy or sell some holdings.
What’s the difference between an ETF and a fund?
A fund is ‘active’ and an ETF is ‘passive’. A fund is managed, so there is a person at the centre making active decisions on what to own. An ETF passively tracks the performance of an industry or market according to a fixed set of instructions. There are some Bitcoin ETFs available that track the price of Bitcoin. See our selection of the best BTC ETFs.
Can funds hold other coins as well as Bitcoin?
In theory, yes, although in practice there aren’t many available yet. It’s likely that in the future more funds will pop up that do hold a range of coins as part of their portfolio. The alternative option is to find a fund that invests in companies that are exposed to the market, such as blockchain-based businesses or crypto exchanges.
Are crypto funds safe to use?
Yes, they have to abide by regulations set out by financial authorities. The broker you use to buy shares in one has to be regulated as well. Using a fund offers much more protection than if you buy Bitcoin on an exchange.
Should I use a cryptocurrency fund?
A fund is a great option if you want to get exposure to Bitcoin without owning it yourself. The best funds take the intricacies of timing the market out of your hands and leave it to the professionals.
However, the lack of mutual funds (i.e. funds available to the average investor, as opposed to hedge funds that are for institutional buyers) available at the moment means it might not be a practical option for you just yet.
To help you decide whether to invest in a fund, we’ve summarised all the most important pros and cons into the table below.
- A fund puts your money in the hands of a professional investor
- Can be a more secure way of investing in Bitcoin
- Funds can give you access to assets you might not be able to afford on your own
Alternative ways to invest
Since funds can be off-limits to the average bank balance, at least until more come onto the market, you might want to invest in Bitcoin in a different way. The most straightforward option is to buy the coins directly, which you can do through a broker. Any of the platforms below are perfect for beginners and you can use them to get your hands on coins in seconds.
Where do I go now?
Either to the table at the top of the page, where you can choose a fund to invest in, or pick a broker from the list above if you want to own Bitcoin yourself. Alternatively, you can read more about the other ways to get Bitcoin, such as ETFs and trusts, or head to our courses section to find out more about how cryptocurrency works.
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