The rise of cryptocurrency has created many new investors who have little experience. Most of the people I come across either on social media or at meetups have effectively created their own actively managed mutual fund. After doing some research they decide which projects they believe will grow the most and invest/speculate in those. While crypto currency is relatively new the traditional markets have a long history of data. There are countless statistical studies in the traditional markets showing only a few percent of actively managed funds beat a simple index. Warren Buffet states when he passes the portfolio he'd pass to his family would be 90% S&P 500 index and 10% cash.
I will acknowledge the cryptocurrency markets are not as efficient as the traditional markets but the gap will inevitably close quickly with the amount of money coming into the space. So my question to everyone is why go with a strategy that has massive statistical evidence from the traditional markets that is quite unlikely to beat a simple index? Also an index requires much less effort than all the research needed to guess what projects will be the winners! Other advantages are low fees, tax efficiency and low stress!
My next post will be on how to create a simple index where the stats from decades in the traditional markets show you'll likely be beating over 90% of people investing in cryptocurrency.
References"
[1] https://www.marketwatch.com/story/why-way-fewer-actively-managed-funds-beat-the-sp-than-we-thought-2017-04-24
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