(04/01/22) Should You Invest in Blockchain and Crypto Companies Through Mut

Proponents of cryptocurrencies like Bitcoin (BTC) make many of the same arguments for investing in it as have been made over many years by believers of gold, states Eric Tyson of King Features Syndicate.

In fact, many crypto advocates call Bitcoin “digital gold.” I think that’s a stretch but let’s consider for a moment that some cryptocurrencies might be digital gold. To that I say, why bother given that gold’s long-term returns have been terrible—as I’ve written about many times, gold’s returns have just barely kept up with the rate of inflation and not substantively ahead of it.

But what about the currency angle? There are few mutual funds and ETFs that invest in currencies, and they all have mediocre to poor long-term track records. This makes sense because currencies—which are equivalent to keeping your money in cash—are poor investments. Consider that the purchasing power of the US dollar declines at a rate of about 1.5 percent per year over the long term. Why would the now more than 17,500 (and growing) cryptocurrencies be any different?

Some small and mostly upstart fund creators and providers have come out with crypto-focused funds—mostly exchange-traded funds. The ones I’ve reviewed are burdened with high fees, poor diversification, and unproven and dangerous/risky investing strategies. I wouldn’t put my money in any of them so I can’t recommend any to you at this time.

For blockchain and certain related cryptocurrencies that have commercial applications, some public companies are pursuing those opportunities and there will be other companies in that space that go public and which fund managers can invest in. There are in fact a number of public companies that participate in this space. So, you can and will participate in the profit-making potential in this space by investing through professionally managed diversified funds that I recommend, especially those that invest in smaller company stocks, such as Vanguard Tax-Managed Small Cap (VTMSX) and Vanguard Small Cap ETF (VB).

Keep in mind also that there are larger public companies such as Advanced Micro Devices (AMD), Block (SQ), International Business Machines Corporation (IBM), NVIDIA Corporation (NVDA), PayPal (PYPL), Taiwan Semiconductor (TSM), and others that are participating in the blockchain and crypto spaces. So when you invest in diversified mutual funds and ETFs that hold those companies, you’re getting exposure to these new and emerging sectors. So, if you’re a diversified mutual fund and ETF investor like myself, you’ve got exposure to this and many other emerging sectors. That’s the beauty of public companies and investing in them through diversified funds.