Sometimes you just don’t have the time to dedicate hours on end to cryptocurrency research but still want to invest. We get it. But does that mean you’re out of luck when it comes to cryptocurrency investing? Absolutely not! Today we’re going to break down passive investing and show you a way to start today! Let’s take a look at what passive investing is, what dollar cost averaging is, and how you can start your passive investment strategy in under 10 minutes.
So what is “passive investing,” anyway? Well, just like with normal investing, we’re going to be using our money smarter, not harder, to grow over time. However, unlike typical investing that requires a considerable time commitment for specific cryptocurrencies, we’re going to be putting our strategy on autopilot.
Passive investing, also called “passive management,” is going to make things a little easier. All we’re looking to do is set up our strategy and essentially automate the rest of the investing process. For a passive approach, investors are typically looking to invest in a market-weighted index or portfolio of assets. In order to do that, we have a few different options.
While we can always find a market-weighted approach by investing in a crypto fund, there are some simpler options as well. In today’s example, we’re going to be using Bitcoin (BTC) and Ethereum (ETH) as replacements for index funds. Now obviously the two cryptocurrencies are not indexes of the crypto asset markets at large. However, being the two largest (and arguably the most well-known) cryptocurrencies, they tend to reflect market sentiment pretty well. Generally speaking, the price movements of BTC and ETH track along (roughly) with the crypto markets as a whole. Combine that with a strong belief in the disruptive power of cryptocurrencies for the financial sector in the future, and we’re still left with a lot of room for growth. So let’s get started!
Dollar Cost Averaging
Another way to think about what we’re doing here is comparing the practice to dollar cost averaging. If you’re not already familiar with the financial markets and what this phrase means, here’s a brief definition from Investopedia:
Dollar-cost averaging (DCA) is an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. The investor purchases more shares when prices are low and fewer shares when prices are high.
In our example today, we won’t be investing a specified amount of money in crypto, but we will be continuously averaging our way into the market. Although we aren’t putting in a “fixed dollar amount” into our portfolio, we are remaining consistent with the timing of purchasing our assets. Basically, all dollar cost averaging means is that we aren’t trying to time the market. Instead, we’re going to purchase BTC or ETH once every week (or month), regardless of price. Sometimes we’ll buy BTC and ETH when the price is a little high, sometimes we’ll get the crypto assets at a bargain price. The idea is that, in the long run, we’ll accumulate assets consistently over time at a reasonable average cost.
What Does Coinflash Have To Do With Passive Investing?
Coinflash is a perfect example of an app that can help significantly with your passive investing strategy. Since we’ve already decided that we’d like to use BTC and ETH as our assets of choice for investing, we can easily set up our account. If you’re already familiar with other “save the change” apps, then this won’t be new, but if you’re not…
Here’s how it works:
- You buy something with your card, let’s say it was $1.60
- Instead of charging $1.60 to the card, you round up to the next dollar ($2.00)
- The difference between the two ($0.40) automatically gets invested in cryptocurrencies (BTC and ETH)
It’s that simple.
After installing the app and linking it with both your bank account and Coinbase account, the work is done for you. As you continue about your day and stick to your normal spending habits, you’re actually investing. It may not seem like a big difference, but have you ever thought about how many times a day/week you swipe your card? Coffee in the morning. Swipe. Filling up the car. Swipe. Getting lunch. Swipe. I think you get the idea.
By using an app like Coinflash, it’s just like putting that spare change of yours into your cup holder in the car or in a jar at home. But unlike the cup holder or jar, this change is invested in one of the fastest growing asset classes to date. Once everything is up and running, you’ll be passively investing in cryptocurrencies in no time. Not only will you be investing passively, but you’ll be doing your own version of dollar cost averaging into the markets as well. (Chances are, you’ll probably start noticing a pattern in your spending and contribute relatively consistent amounts each week.)
Are you looking to start passive investing? Get out there today and explore your options!