Low Minimum Initial Investment Mutual Funds

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Every so often I get an email from a reader asking me whether they should open up a mutual fund account with a few hundred dollars or try to save up more before they enter the wild and crazy world of the stock market. My typical advice is that they should save up a little bit of money first because the minimum account balance required by many mutual funds is often much greater than a few hundred bucks. Even if you wanted to open up a regular brokerage account and trade stocks, it’s a bad idea because of commissions. Unless you trade for free with Zecco, even the $4.95 commission of TradeKing would be disaster on a few hundred dollars.

However, in my Vanguard-centric view of the mutual fund world, I overlooked some firms offering funds with much lower balance requirements. Vanguard’s lowest offering is the STAR Fund (VGSTX) at $1,000 but there are many mutual funds are need a mere $100 to start.

The quickest way to find them is to use Morningstar’s mutual fund screener. You can set all sorts of factors but the minimum initial investment factor is listed under Cost and Purchase. While you’re there, I’d definitely set Load funds to “No-load funds only” (as in no sales commission) and Expense ratio less than or equal to: to “1.00%.” That will, as of this writing, get you that hits the screener maximum of 200.

As for which one is best, I’d just tick the 5-star setting and pick from one of the 26 results. There are several options in there that could yield good results. I’d ignore the YTD returns as a factor since all stock funds will have suffered huge losses (and bonds have eeked out tiny gains) this past year.

One caveat, the tool will list funds that are closed to new investors. Those who picked out the Fidelity fund listed in the screen above, the Fidelity Congress Street fund, will notice that it’s closed to new investors. 🙁

{ 10 comments, please add your thoughts now! }

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10 Responses to “Low Minimum Initial Investment Mutual Funds”

  1. Eric N. says:

    Hey! I have the STAR fund!

    I’m trying to accumulate enough in it to move to one of Vanguard’s target retirement funds.

  2. Tim says:

    or you could go with someone like trowe in automatic investment plan that eliminates the min investment amt

  3. Miss M says:

    I’ve used T Rowe Price’s automatic asset builder since 2002 and I’m happy. OK maybe I’m not happy with my returns right now, but I don’t blame TRP for that! There is no minimum to start and you only have to invest $50 at a time, 100% no load and with the asset builder plan there are no account balance minimums or fees either. Just don’t shut off the AAB unless you have reached the balance minimum, below $2500 per fund and you get hit with fees. I think it’s a great way for beginners to get started since they don’t have to wait to save a huge initial investment. Also, using AAB you’re automatically dollar cost averaging.

  4. Joe says:

    I have used Homestead Value Fund (hovlx). It is rated 4 stars by Morningstar. The minimums are very low. If you meet the low minimums or you agree to invest automatically until you meet the low minimus you can put $5 a month into the account if you want to start very very slow.

  5. JimmyDaGeek says:

    You wrote “As for which one is best, I’d just tick the [Morningstar] 5-star setting and pick from one of the 26 results.” Morningstar’s rating system has no predictive value whatsoever. This has been documented many places.

  6. jim says:

    @Jimmy: That’s a good point… thanks for sharing it.

  7. Baolson says:

    Another site I found recently (because I am trying to find a list of funds with small minimums for my children) is

    They have a free fund screener (Fund-O-Matic Fund Screener) where you can screen to find funds with a small initial balance and narrow down by asset category, etc.

    It is a pretty slick looking site and they have an interesting rating system.

  8. josh says:

    very very helpful thank you

  9. Dallas says:

    Thank you so much for the helpful advice. Being a self-taught beginner, I get a little confused at times… But I really appreciate the advice. Thanks!

  10. Dru says:

    How do I Actually Purchase a Mutual Fund?

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