Some mutual funds let investors buy in with no minimum at all—meaning that even $5, $10, or $100 can get you invested. Although there are mutual funds with no minimums, most retail mutual funds do require aminimum initial investmentof between $500 to $5,000, with institutional class funds and hedge funds requiring minimums of at least $1 million or more.
Key Takeaways
- Many mutual funds require minimum investments in order to participate, ensuring sufficient capitalization and covering of the fund's operating costs.
- These minimums can typically range from $1,000–$3,000 for investors, but they may be significantly larger for institutional investor class funds.
- That said, several mutual funds do now offer $0 minimums.
What Is a Minimum Investment?
A minimum investment is the smallest dollar or share quantity that an investor can purchase when investing in a specific security, fund, or opportunity. Often, mutual fundswill require a minimum amount in order to ensure they have enough assets under management (AUM) to achieve their investment goals and cover overhead. This means an investor cannot invest or buy any amount they want; they need to invest or buy at least the minimum amount required. Some funds prefer to cater to smaller clients, with low minimum investment products, while other firms prefer higher minimum investments that are geared toward highernet worthindividuals.
For beginning investors, this amount can be difficult to reach and often means their entire account balance is invested in just one fund. These minimum amounts are set by each fund as a means to keep small, short-term trades from affecting cash flows and the fund's daily management. Each fund's minimum is dictated by the style of the fund and its investment objective. However, there are some funds with lower minimums that make mutual fund investing accessible to all investors.
Examples of a Minimum Investment
Kiplinger recommends a few funds that have lower minimum purchase amounts. The CharlesSchwab Corporation (SCHW) offers a broad market index fund and a slew oftarget-date funds, each with no minimum initial purchase. Investors with the ability to invest at least$250 have access to many more funds from many different companies. For example, American Funds offers several solid funds across many different sectors and investment styles, all at this price point. All Dodge & Cox mutual funds require a minimum of $2,500, while many Vanguard mutual funds need $3,000 to get started. Meanwhile, Fidelity offers several mutual funds that have $0 minimums.
A mutual fund's minimum also varies depending on the type of account. Some companies have lower initial purchase amounts for IRA accounts. For example, T. Rowe Price (PRNEX) requires a $2,500 minimum initial purchase for its mutual funds held innon-retirementaccounts but only $1,000 for retirement accounts like IRAs. 529 College savings plans andUniform Transfers to Minors Act (UTMA) accounts also usually have much lower fund minimums, and some fund companies even allow the minimum to be met through systematic purchases as low as $25 per month.
Advisor Insight
Rebecca Dawson
Dawson Capital, President, Los Angeles, CA
Mutual funds are either closed-end or open-end funds. Closed-end funds issue a set number of shares to the public through an initial public offering (IPO). These shares trade on the open market via market supply and demand. Therefore, they are not subject to minimum investment amounts; the price is reflected by the market and you can buy as many units as you can afford.
Open-end funds do not issue a set number of shares and are "open" to new investments, and shares are created or written off as necessary. These funds do enforce a minimum investment, which typically ranges between $1,000–$5,000. The minimum may be substantially lowered or waived altogether if the investment is made in a retirement account or if the investor agrees to automatic, reoccurring investments.
FAQs
Calculate your investing budget
Is there a minimum investment for mutual funds? ›
Although there are mutual funds with no minimums, most retail mutual funds do require a minimum initial investment of between $500 to $5,000, with institutional class funds and hedge funds requiring minimums of at least $1 million or more.
How much should a beginner invest in mutual funds? ›
One should invest at least 20% of their salary in mutual funds and can later increase whenever possible. The effect of inflation has made it essential for investors to look at options such as mutual funds to prevent their investment from losing its value over time.
Can I invest small amounts in mutual funds? ›
Investors can start investing with relatively small amounts of money, making them suitable for both novice investors and those with limited capital. Mutual funds achieve cost efficiencies by pooling money from multiple investors, which leads to lower investment costs compared to investing in individual securities.
What's the smallest amount you can invest? ›
Minimum investment amounts can vary based on the mutual fund in question and can stretch anywhere from $1.00 all the way to $1 million or more. Hedge fund minimum investments can be even larger, as can some LPs and unit investment trusts.
What if I invest $1,000 in mutual funds? ›
Here your money will be safe or have zero risk. Mid Cap Mutual Fund:- If you invest Rs 1000/per month for 20 yrs in Mid cap mutual fund, Assuming that 15–16 % interest rate. You will have approx 15–16 lakhs.In long term all mutual funds are safe.
Which type of mutual fund is best for beginners? ›
List of the Best Mutual Funds for Beginners
| Fund Name | Sub Category | Expense Ratio (%) |
|---|
| SBI Tax Advantage Fund-III | Equity Linked Savings Scheme (ELSS) | 0.00 |
| Quant ELSS Tax Saver Fund | Equity Linked Savings Scheme (ELSS) | 0.76 |
| Nippon India Small Cap Fund | Small Cap Fund | 0.80 |
| Axis Small Cap Fund | Small Cap Fund | 0.53 |
4 more rowsMar 28, 2024
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
Are mutual funds really worth it? ›
Mutual fund investments when used right can lead to good returns, keeping risk at a minimum, especially when compared with individual stocks or bonds. These are especially great for people who are not experts in stock market dynamics as these are run by experienced fund managers.
Can I withdraw money from a mutual fund anytime? ›
An investment in an open end scheme can be redeemed at any time. Unless it is an investment in an Equity Linked Savings Scheme (ELSS), wherein there is a lock-in of 3 years from date of investment, there are no restrictions on investment redemption.
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
Is investing $50 a month worth it? ›
Investing only $50 a month adds up
Contributing $50 a month to an investment account can help create impressive savings, even at a moderate 5% annual growth. It's a common myth that you need a few thousand dollars to begin investing.
Is investing $100 in stocks worth it? ›
On average, the stock market yields between an 8% to 12% annual return. Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100.
How safe are mutual funds? ›
Are mutual funds safe? All investments carry some risk, but mutual funds are typically considered a safer investment than purchasing individual stocks. Since they hold many company stocks within one investment, they offer more diversification than owning one or two individual stocks.
What is the minimum amount to start a mutual fund? ›
In India, the Securities and Exchange Board of India (SEBI) mandates that mutual funds offer a minimum investment amount of Rs. 100 for lump-sum investments and Rs. 500 for Systematic Investment Plans (SIPs). Some mutual funds may have a higher minimum investment amount.
How much does it cost to start a mutual fund? ›
Estimates for initial setup costs vary from $25,000 to upwards of $100,000, depending on the nature of your mutual fund and who sets it up. The costs on an ongoing basis can make it difficult for new mutual funds to turn a profit.
Is there a minimum period for mutual funds? ›
The minimum holding time requirement applicable to mutual funds is one day. This is because the fund determines the applicable purchase price of the fund's units/shares on a daily basis. The price depends on the Net Asset Value (NAV) of the fund as of the purchase date.
What is the minimum amount of investors in a mutual fund scheme? ›
Each scheme and individual plan(s) under the schemes should have a minimum of 20 investors and no single investor should account for more than 25% of the corpus of the scheme/plan(s).
What is the minimum net worth for mutual fund? ›
In case the applicant is not complying with only the requirement of profitability, the applicant may be considered to sponsor a mutual fund subject to having a net worth of not less than INR 100 crores for the purpose of contribution towards networth of Asset Management Company (AMC) and the AMC should maintain the net ...
What is the minimum investment for a fund? ›
Average Minimum Investment for Different Mutual Funds
| Mutual Fund Company | Minimum |
|---|
| Vanguard | $3,000 |
| Fidelity Investments | $2,500 |
| Charles Schwab | $0 |
| TD Ameritrade | $0 |
Jan 25, 2023
