Minimum Investment

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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 ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
Related Articles
  1. Options & Futures

    Tailoring Your Investment Plan

    Start your own investing adventure with the help of some simple guidelines.
  2. Mutual Funds & ETFs

    4 Strategies For Managing A Portfolio Of Mutual Funds

    Discover some common strategies to devise a plan and maintain your holdings to reflect it.
  3. Mutual Funds & ETFs

    Using ETFs For Small Periodic Investments

    ETFs have lower costs than index funds, but the cost to buy and sell can be more expensive.
  4. Mutual Funds & ETFs

    How To Apply Technical Indicators To Mutual Funds

    Mutual funds do not readily lend themselves to technical analysis, but investors can use common indicators to evaluate mutual funds as easily as stocks.
  5. Professionals

    Should Investors Nix Actively Managed Funds?

    Index fund returns are on a tear but does this mean investors should nix actively managed funds?
  6. Mutual Funds & ETFs

    Are These 2015's Most Promising Mutual Funds?

    For 2015, the mutual funds covered below are likely to offer more upside potential than the vast majority of mutual funds in existence.
  7. Mutual Funds & ETFs

    Why These Could Be 2015's 10 Best Mutual Funds

    These 10 mutual funds offer strong potential for 2015. Here's why.
  8. Professionals

    State Street Slashes ETF Fees

    State Street has slashed fees on 41 of its ETFs in the wake of historic redemptions.
  9. Stock Analysis

    What Makes LinnCo Different From MLPs?

    MLPs are some of the favorite investments of dividend investors, as the surge in the energy industry increased the amount of income that MLPs paid out to.
  10. Stock Analysis

    Will Spinoffs Give American Capital A Pop?

    American Capital shareholders have long awaited a plan to spin off the company's investments from its prized asset-management business.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center