As announced in March 2018, Coinbase has unveiled Index Fund for the US investors. The fund is aimed at 4.3 million investors, who can invest funds in the range of $250,000 to $20 million. The investors will get an easy access to the crypto assets on Coinbase. The company is also working on other offerings for those, who could not afford to invest $250,000 and above.
The Index Fund includes cryptocurrencies including LTC, BCH, BTC, and ETH. It will also add Ethereum Classic to the Index Fund.
Why It Cannot Be Called An Index Fund?
Actually, it cannot be called an Index Fund. Index funds are actually Exchange Traded Funds (ETFs) that includes participation from millions of investors with a portfolio of different stocks. ETFs are usually made up of hundred or more stocks. But, the Coinbase index fund just consists of 5 digital assets.
It is relatively a new concept from Coinbase. The main aim of this concept is to provide institutional investors an opportunity to invest in cryptocurrencies. Otherwise, they may back out either to uncertainty of legal compliance or fear.
Flaws in The Index Fund
It is only available to accredited investors in the US. It requires a minimum investment of $250,000. Only rich investors can pump in the minimum fund to the index fund.
To invest in this index fund, the individual should have a net income of $200,000 in the past two years or have a net-worth of more than $1 million. You should have an assurance to continue this income. You will easily find a place in the top one percent of the earners.
Very High Fee
Annual fund charges are fixed at 2%. But, the investors need to pay just 0.4% towards the fund expenses in case of Vanguard Total Stock Market Index Fund. Therefore, investors need to pay the higher fee to participate in Index Fund operated by the Coinbase. Even the wealthy investors need to think before jumping into the Coinbase index fund.
The current composition of the Coinbase index fund is Bitcoin (61.47%), Ethereum (27.17%), Bitcoin Cash (8.22%), and Litecoin (3.14%).
But on the positive side, it is beneficial for long-term investors as they need to pay just one-time fee only.