This article was written by Isonex Captial to discuss the benefits of digital currency index funds. As cryptocurrencies gain broader prominence as an asset class, they’ve become the focus of a growing number of investors. Many still remain apprehensive of digital assets and only a tiny percentage of the global population understand what they really represent. This is starting to change, and one of the instruments of this change is the blockchain technology that underpins the cryptocurrency market.

Blockchain technology is changing the entire infrastructure of the banking and finance industries. It will change the way we vote, exchange information and create contracts with each other. This means that an investment in the cryptocurrency market is no longer just a speculative bet. It is an investment in a futurist technology whose successful projects will win a large market share of the industries they disrupt and offer huge potential as a sound long term investment. With the innovative technologies being developed right now by some crypto projects, we are definitely looking at the next big thing. The challenge is identifying which ones before their true value is realized.

Investing in any market for the first time can be daunting. Sound financial advice for anyone entering any investment market is to thoroughly research any stock, or in this case, cryptocurrency before committing their hard earned money. We should also study competitors to better understand a particular market and all the main players, only then can we make an informed choice as to which companies might emerge on top, hopefully netting us a good return. With so many cryptocurrencies on the market, this would require full time work and research, particularly in single stock investing. Some are indeed leaving behind successful careers to do just that, but for many of us, that is just not an option.

Index funds allow investors to obtain returns from all the listed assets within an index. So from an investor perspective, following a well diversified index fund is almost as efficient as tracking the entire market. Index funds save you the time and effort of having to research investments and manage a portfolio yourself. If you do want to buy individual cryptocurrencies, you still can. You can build the foundation of your investment portfolio around index funds, and then invest in individual cryptocurrencies to further diversify your portfolio. This protects your overall wealth from dramatic market fluctuations, while still letting you enjoy a more hands-on active trading experience.

Another key advantage of investing in index funds is that they can help you get better returns by removing the psychological biases that individual investors must overcome to manage a portfolio effectively. Because it is comprised of multiple components, an index that is well balanced tends to be less vulnerable to price volatility than an individual currency.

There are a number of benefits to investing in cryptocurrency index funds rather than buying individual cryptocurrencies. For many people it’s generally easier, negotiating the complexities of exchanges, regulations, security protocols and wallets needed to maintain a cryptocurrency portfolio, can lead to procrastination and doubt, which could lead to some investors missing out altogether.

With an index fund, the assets are handled for you, meaning you never have to deal directly with the cryptocurrencies you own a share of. Index funds eliminate human error and therefore most of the risk inherent in picking individual assets. The passive approach that eliminates almost all trading activity. As there are no active human fund managers within index funds, there are also no actively managed mistakes. When you invest in an index fund, you are protected against the misguided or merely unlucky decisions that active fund managers are liable to make.

Security is of paramount importance in the crypto sphere. It is not unheard of for investors to have their computer compromised through malicious software, falling victim to an exchange attack, or even losing their funds altogether. The dentralized nature of cryptocurrencies means there is no authority to recover stolen or lost digital assets, the security of digital assets is the owner’s sole responsibility.

Investment companies absolutely must take the proper precautions to keep the funds assets safe. With a cryptocurrency asset fund, you can rest assured knowing that the fund is taking every precaution to protect your digital assets, lest it compromises its own financial integrity, legitimacy, and reputation. At Isonex, security is in line with leading industry standards. We ensure that hackers or other malicious online actors cannot hack our funds digital assets.

Index funds protect investors from the risks of investing in this emerging market. Many asset funds diversify their portfolios by including a variety of cryptocurrencies or different index strategies. At Isonex we have developed the world’s first tokenized equal-weighted cryptocurrency index fund. This means that we invest equally across the top 15 cryptocurrencies set by market cap through our IX15 token.

The cryptocurrency market is currently over saturated with coins, many of which have no real world value. When you invest in the top 15 coins, you are holding assets that represent over 80% of the entire market cap. This means that you have no direct investment in one particular coin. So for example in a worst case scenario, should a particular project fail, it will have no impact on your portfolio. In other words, it will be replaced with another top 15 coin. This action is performed by rebalancing the portfolio at regular intervals.

The fund rebalances the holdings every 30 days to ensure that it always tracks the top 15 coins as their prices fluctuate. This is performed in the same way an S&P500 index fund tracks the top 500 US stocks by market cap. Rebalancing is the act of periodically adjusting a portfolio so that its asset composition reflects the index it aims to track. Rebalancing an index fund not only reduces risk but also increases the median return. A smart contract directly ties principal assets to each token. This helps to protect the price of the token — the token will continue to maintain its worth and will not go below its share of the fund assets.

The investment objective of the IX15 equal weighted index fund is to replicate the daily performance of the top 15 cryptocurrencies by market capitalization. Index funds provide investors with a number of benefits. They simplify portfolios, lower risk and increase returns. This strategy makes them straightforward investment models as they achieve a high level of market diversification with a single asset, which promotes higher returns and reduces the overall risks to a portfolio.

Removing expensive analysts and active fund managers results in, the costs of managing an index fund being considerably lower than actively managed funds. The subtle differences in returns makes a big difference over the long term. Cryptocurrencies and their underlying technology, the blockchain, are an asset class completely uncorrelated to other investments, and as such represent the perfect addition to any portfolio.

Final thoughts

Hopefully this has given you a better understanding of what an index fund is. Index funds pool your money to buy all the underlying cryptocurrencies in the same proportions within the index it tracks. This would ordinarily be impossibly expensive for most investors. Buying the index affords you the opportunity to diversify your investment, which is a sound strategy for a successful portfolio. It is one of the simplest ways to grow wealth over time. For anyone that’s not interested in researching individual cryptocurrencies to put together a balanced and diverse portfolio themselves, index funds are the best investment tool available.

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**Isonex Capital is dedicated to the growth of digital currencies within the global marketplace and in facilitating investment into the blockchain ecosystem. We strongly believe in investor protection through security and transparency. We are committed to helping newcomers gain an understanding of the risks involved in this new asset class. If you would like to find out more about us, visithttps://isonex.io