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
Many mutual fund minimums range from $500 to $3,000, though some are in the $100 range and there are a few that have a $0 minimum. So if you choose a fund with a $100 minimum, and you invest that amount, afterward you may be able to opt to contribute as much or as little as you want.
What is the smallest amount I can invest in 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 money should I start with in a mutual fund? ›
Mutual funds require minimum investments of anywhere from $1,000 to $5,000, unlike stocks and ETFs where the minimum investment is one share. Mutual funds trade only once a day after the markets close. Stocks and ETFs can be traded at any point during the trading day.
What is the minimum investment for a fund? ›
A minimum investment is the smallest dollar or share quantity that an investor can purchase when investing in a specific security, fund, or opportunity. A hedge fund, for example, may require that their clients deposit at least $100,000 with the firm. Or, a mutual fund may require at least $3,000 to be invested.
Can I invest 500 in mutual funds? ›
Start investing by registering a SIP of Rs. 500 per month. Here is a list of some of India's Top Diversified Equity Funds across market capitalizations. These Funds are highest rated Equity Funds & are suitable for long-term investment horizons.
What is considered a small mutual fund? ›
A small mutual fund might invest $1 million in a stock, while a large one might invest $30 million.
What is a small value mutual fund? ›
Small-value funds invest in stocks of small companies that are less expensive or growing more slowly than the other small-cap stocks.
Can I start a mutual fund with $100? ›
Many mutual fund minimums range from $500 to $3,000, though some are in the $100 range and there are a few that have a $0 minimum. So if you choose a fund with a $100 minimum, and you invest that amount, afterward you may be able to opt to contribute as much or as little as you want.
How much does the average mutual fund make a year? ›
Looking at the seven major categories of mutual funds above, the average annualized return for 2021 was 11.54%. Large-cap stock funds performed the best, outpacing many of the returns investors may have gotten on other accounts, such as certificates of deposit (CDs), high-yield savings accounts, and even real estate.
How much does the average mutual fund return? ›
What Is the Average Mutual Fund Return Over the Last 20 Years? High-performing large-company stock mutual funds have produced returns of up to 12.86% in the last 20 years. Comparatively, the S&P 500 has produced returns of 8.13% since 2002.
In fact, you can become an investor with $100 or less. Many "everyday people" started with small amounts of money and, over time, have watched the return on their investments grow.
Is $5 000 enough to start investing? ›
The reality is that you can begin investing with as little as $5,000. In fact, this is all you need to start building a nest egg that serves your future sell quite well. The only question is what's the best way to invest. Different strategies might be best depending on your goals, investing style, and risk tolerance.
Can I invest one time in mutual fund? ›
If an investor wishes to invest a significant amount of money in one go, mutual funds offer the option of investing in a lump sum.
What is the 30 day rule for mutual funds? ›
To discourage excessive trading and protect the interests of long-term investors, mutual funds keep a close eye on shareholders who sell shares within 30 days of purchase – called round-trip trading – or try to time the market to profit from short-term changes in a fund's NAV.
How much will I get if I invest 1000 in mutual fund? ›
SIP investment
FV = Future value or the amount you get at maturity. For example, you invest Rs 1,000 a month in a mutual fund scheme using the systematic investment plan or SIP route. The investment is for 10 years, with an estimated rate of return of 8% per year. You have i = r/100/12 = 8/100/12 = 0.006667.
What will happen if you have $10000 to invest a mutual fund with a 5% load? ›
The key point to keep in mind about a front-end sales load is it reduces the amount available to purchase fund shares. For example, if an investor writes a $10,000 check to a fund for the purchase of fund shares, and the fund has a 5% front-end sales load, the total amount of the sales load will be $500.
Can mutual funds buy stocks under $5? ›
Mutual funds and other institutional investors may choose to avoid stocks priced at less than $5 per share, but there are no specific rules or laws prohibiting the practice.
How much amount one can invest in mutual funds? ›
There are no upper limits on the amount you can invest when you buying from the AMC in lump sum. The third way of buying is via systematic investment plan (SIP). Here you enter into an agreement with the fund to regularly invest a small amount on a particular day of the month.
Which mutual fund has minimum 100? ›
Top Mutual Funds to Invest With Rs. 100 Minimum SIP
| S.No. | Mutual Funds to Invest With Rs. 100 Minimum SIP |
|---|
| 1. | ICICI Prudential Technology Direct Plan-Growth |
| 2. | Aditya Birla Sun Life Digital India Fund Direct-Growth |
| 3. | Nippon India Small Cap Fund Direct-Growth |
| 4. | ICICI Prudential All Seasons Bond Fund Direct Plan-Growth |
1 more rowJan 17, 2023
You plan to invest $100 per month for 25 years and expect a 10% return. In this case, you would contribute $30,000 over your investment timeline. At the end of the term, your portfolio would be worth $133,889. With that, your portfolio would earn around $103,889 in returns during your 25 years of contributions.
