Cryptocurrencies are a volatile asset class. A single day could see assets climbing or plunging over 50% in value.

The thought of losing half your portfolio value within hours is frightening.

Thankfully, there are tools which can help you diversify your portfolio. Instead of manually executing trades to construct a custom index, these services automatically manage this process.

Why Index the market?

Indexing can be used to provide wider market exposure, lower operating expenses, and reduce portfolio turnover. Index funds have proven to be one of the most effective long-term strategies available to investors in the traditional financial system. When compared to actively managed funds, which have management fees and expenses, index funds tend to produce higher returns. In the case of cryptocurrencies, indices can also help reduce asset-specific risk by diversifying a portfolio into multiple similar alternatives. This lessens the impact of a single poorly performing asset within the index. Traditional investors, who are generally put off by holding risky positions may find this to be an attractive way to stay in the market without drastically increasing their risk profile.