Diversify your risk when investing in Bitcoin and cryptocurrencies.
In today's "instant gratification," microwave-results society, many people are looking -- again -- to time the crypto market and win big, almost with a "win-the-lottery" type of mentality.
However, Parul Gujral says this is a recipe for probable disaster. In my video interview with the CEO of Snowball, Gujral agrees that you can still win big if you time the market just right, but as many people experienced in 2018, you can also lose big just as quickly.
He believes the key to success when it comes to investing in cryptocurrency is to diversify your risk by investing in a pool of cryptocurrencies that are vetted by financial professionals, just like your 401k accounts or index funds.
"With our mobile app, we let you invest in cryptocurrencies or digital assets like Warren Buffet wants you to invest in stocks through the S&P 500. Warren Buffett, Ray Dalio and even Tony Robbins in his book, Money Master the Game, all recommend index investing. By investing in an index, the fees and risk are much lower, it's tax-optimized and you can typically outperform the market," Gujral said.
The recommendation of investing in an index fund means you're not putting "all your eggs in one basket" like many people did when they invested in a single coin or ICO and lost big when the cryptocurrency market deflated in 2018.
Paul Veradittakit, a partner at Pantera Capital, also recommends the concept of diversifying cryptocurrency investments: "I think if you're an individual investor, it makes sense to try to diversify as much as possible just because there is a lot of risk in cryptocurrency and a lot of volatility, and you want to make sure that you have a basket of them and hopefully hit on one of the investments that will do very well."
However, most people only have access to invest in crypto funds or indices if they are an accredited investor -- someone who makes over $200,000 for 2+ consecutive years and/or has $1 million of assets, not counting primary real estate. This means the novice or average person typically doesn't have the ability to invest in a crypto fund.
It’s a major reason why Gujral founded Snowball and hopes his app will help democratize access to the best crypto fund and index strategies. He believes the average investor should be able to wisely invest in the cryptocurrency sector with less friction and reduced risk.