Minimum Investment


DEFINITION of 'Minimum Investment'

The smallest dollar or share quantity that an investor can purchase when investing in a specific security or fund. Most often seen in relation to mutual funds, minimum investments are also found consistently in fixed-income securities hedge funds, collateralized mortgage obligations (CMO) and limited partnerships (LP) where $1,000 units is typically the smallest cut allowed.

BREAKING DOWN 'Minimum Investment'

Minimum investment amounts for mutual funds can stretch anywhere from $0 all the way to $1 million or more for institutional share classes. Hedge fund minimum investments can be even larger, as can some LPs and unit investment trusts. For retail investors, there remains a large selection of funds that have modest minimum investments of a few hundred dollars.

A big factor for a fund manager in determining a minimum investment size is the strategy and liquidity demands of the fund itself. By setting a high minimum investment, fund managers can effectively weed out short-term investors and regulate cash inflows to the fund, which can be helpful for day-to-day management of the assets.

  1. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...
  2. Institutional Shares

    A class of mutual fund shares available for sale to investing ...
  3. Retail Investor

    Individual investors who buy and sell securities for their personal ...
  4. Minimum Deposit

    The smallest amount of money that an investor/trader must initially ...
  5. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
  6. Unit Investment Trust - UIT

    An investment company that offers a fixed, unmanaged portfolio, ...
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  1. Why do mutual funds require minimum investments?

    Mutual funds require minimum investments to give mutual fund managers the liquidity and confidence they need to make you ... Read Full Answer >>
  2. What is the minimum amount of money that I can invest in a mutual fund?

    Many mutual funds require a minimum initial investment of between $500 to $3,000, with institutional class funds and hedge ... Read Full Answer >>
  3. What do the different types of mutual fund classes mean?

    When checking for different quotes on mutual funds, you might see different prices for classes of mutual fund shares that ... Read Full Answer >>
  4. Can mutual funds only hold stocks?

    There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
  5. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
  6. Do mutual funds pay interest?

    Some mutual funds pay interest, though it depends on the types of assets held in the funds' portfolios. Specifically, bond ... Read Full Answer >>

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