Investing $100 into the top 10 cryptos for a year

An index fund or an ETF is a financial product that allows investors to get exposure to a variety of industries, shares, and financial instruments by just purchasing one index fund or ETF.  

In the stock market, this will be hard to replicate because investors require a large amount of capital to build their own index fund or ETC. 

For example, QQQ, an ETF on NASDAQ that tracks the top 100 stocks on the NASDAQ exchange, is primarily very tech-based, so you will see stocks like Apple, Microsoft, Amazon, Tesla, Nvidia, Google etc. Trying to replicate this will be tough because you will require enough capital to purchase at least one of each stock. 

But in the crypto space, this is much easier to replicate because you can purchase a small number of cryptocurrencies, up to 18 decimal places. For example, $100 of Bitcoin will be 0.002 BTC and $100 of Eth is 0.025eth. But this begs the question: “How can I build my own crypto index fund?” 

Since an index fund tracks certain stocks or industries, there are many ways to create a personalized crypto index fund. There are platform tokens like Eth, Polkadot, Solana, Phantom and Avalanche. There are also metaverse tokens like Decentraland, The Sandbox, Axie Infinity and Enjin, or you can build an index fund tracking the top 10 cryptocurrencies-based market cap. 

Building your own index fund 

With so many options available, one might get overwhelmed with new projects starting up but with new projects comes risk of fraud and rug-pulls that will be detrimental to investments. Thus, we will be building an index fund tracking the top 10 cryptocurrencies based on market capitalization. 

Based on CoinMarketCap, we can see the top 10 cryptocurrencies: BTC, ETH, BNB, USDT, SOL, ADA, USDC, XRP, DOT and LUNA. This works well for a balanced index fund tracking the top 10 tokens. However, having 20% as a stablecoin might prevent the fund from growing. So instead of having both USDT and USDC, we will purchase only one Stablecoin USDT and replace USDC with DOGE, which is in 11th place. 

This index fund will be purchased monthly with $100 going into each of the top 10 cryptocurrencies. By doing so, we will end up with $1,000 invested and updated each month to see how this index fund goes. 

With this index fund, there are three things we can achieve, which can increase our chances of growing our wealth and accumulating weather-tested cryptocurrencies.

The purpose of the index fund

The first thing we will learn from this index fund is to have the discipline to stay constantly invested in the market rather than timing the market, as we covered in a previous article.  

By staying constantly invested in the market, we will be able to take advantage of the dollar cost average, which averages out our cost for purchases in the underlying asset class; in this case, cryptocurrency. 

The second thing we can take away from this index fund is that we do not need huge capital to start investing in cryptocurrency and can start with an amount as low as $100. By adjusting the parameters for this index fund according to your own financial situation, this can be a great starting point even for beginner investors. For example, instead of $100 in the top 10 cryptocurrencies, you can start with $10 in the top five cryptocurrencies, which will cost you $50 per month. Or you can even scale it up to $1,000 in the top 15 cryptocurrencies if fits your purpose and financial situation. 

Lastly, we can also leverage Huobi Earn, which will enable us to start earning interest on the cryptocurrencies we are holding in our exchange account. Huobi Earn is a high-yield account that gives interest to investors for depositing their idle cryptocurrencies in Huobi Earn. 

New to Huobi? Register for a Huobi account and receive up to $300 as a ‘Welcome Bonus’ to help you start your investment journey! If you’re an existing user, check out Huobi Earn, where you can start earning interest from your idle cryptocurrencies! Otherwise, you can bookmark this article to see the progress of this index fund, as we will be constantly purchasing cryptocurrencies every single month in 2022.