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. Unit Investment Trust - UIT

    An investment company that offers a fixed, unmanaged portfolio, ...
  6. Fund Manager

    The person(s) resposible for implementing a fund's investing ...
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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 hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  5. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
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    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>

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