What Are Mutual Funds In Stocks And Crypto?

What Are Mutual Funds In Stocks And Crypto?


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Investing in Mutual funds is a synonym to giving a small-scale player the opportunity to dabble on the big table. 

To break it down further, a mutual fund is a vehicle that brings together money and invests it in financial instruments such as stocks and bonds to generate returns. The amalgamated holdings of these stocks, bonds or other assets owned are known as its portfolio and each investor in the fund partly has a hold on these shares wherein the profits or losses of the fund’s total holdings are proportionally divided. A small fee is charged by the fund houses which are regulated by the Securities and Exchange Board of India (SEBI).

The targeted aim of any Stock Mutual Fund is to create a more diversified portfolio than the average investor could on their own. Mid-cap and Small-cap Mutual Funds have proven to be a money-minting machine since their inception. One of the most significant advantages of investing through a mutual fund is that it gives small investors direct access to professionally-managed portfolios of bonds, equities and various other diversified securities, which would be quite difficult otherwise. 

However, with NFT’s and cryptocurrencies entering the realm, Mutual Funds and other likewise vehicles have begun carving their path from the Stock Market and into the Crypto Market. But as the generic term goes: Mutual Fund investments are subject to market risk… no matter what market it may be in Stocks or Crypto. 

The Indian Mutual Fund Industry has put up with a stellar reputation in offering a plethora of schemes that cater to investors of varied sizable portfolios in the Stock Exchange. Varying  on a scale of Small Cap – Mid Cap – Large Cap, there has been something for every investor to benefit from with the two most promising and crowds favourite Mutual funds to  passively invest in being: 

Index funds: are created with a mixed bag of stocks or bonds that are listed on a particular index. The risk outcome of such investments mirrors the risk of the index itself, as do the returns.

Exchange-traded funds: are generally traded like individual stocks, offering diversification benefits of mutual funds. In several cases, ETFs have a subsequently lower minimum investment as compared to index funds.

The Crypto Market targets to provide similar opportunities and benefits as they test out into the market the latter, i.e. Exchange-Traded Funds also commonly known as ETF’s in the  Crypto universe. 

However, because cryptocurrency is a relatively new asset class, it’s a tad bit more  burdensome to invest in as compared to stocks or bonds. There are no viable means to generally buy crypto through your standard stockbroker, nor can you easily hold it in your retirement account. Fortunately, this is starting to change.

An Exchange-Traded Fund known as NFTZ is the first of its kind to make its way into the  Crypto Mutual Funds Market that will give investors exposure to the ever-booming world of  Non-Fungible Tokens (NFT). Created by Defiance ETFs, the novel fund is positioning itself to invest in companies with significant exposure to Blockchains, the NFT market, and an array of cryptocurrency ecosystems. Matt Hougan unveiled the launch of the Bitwise Blue Chip NFT Index Fund in what he claimed was the world’s first and best cryptocurrency mutual fund, earlier in December. The fund would contain stocks of companies involved in the digital-token ecosystem including 10 of the most valuable NFT collections spread across  Bored Ape Yacht Club, CryptoPunks, VeeFriends, etc, with new emergent added through quarterly rebalancing.

Here’s Where India Stands On The Map Of Home-Grown Mutual Funds In The Crypto World.

The Securities and Exchange Board of India (SEBI) has currently barred local mutual funds players from making crypto-related investments till there is a regulated law for the digital assets. With Investors realizing and acknowledging the regulatory grey areas that need to be attended to for the space to mature, this delay in the launch of crypto-related mutual funds is a setback for those investors looking to diversify their portfolios using the riskier asset class.

As a matter of course, an ETF that is specific to blockchain would have been a vital stepping stone in the adoption of cryptos in the Indian ecosystem nonetheless, the withdrawal of the scheme does not necessarily have a significant impact on its current situation. However, the markets regulator had put the stamp of approval on Invesco’s Blockchain ETF  Fund of Fund (FoF), but the company declined to go ahead with it until regulations were put in place. 

As SEBI awaits clarification from the government for the crypto bill to be passed, Mutual  Funds have made their mark in the Stock Market and there is no stopping to state that they will undoubtedly do the same in the Crypto market.

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