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Fund Minimums And More: It Doesn't Take Much To Invest In Funds

With the market's strong performance this year, investors are starting to think about putting money back into funds again. Those sitting on the sidelines might be surprised to know that, in many cases, all it takes to make a mutual fund investment is $500 or less.

One of the common misperceptions about mutual fund investing is that it takes a minimum of $3,000 or more to open an individual taxable account with a fund family. While popular families like American Century, Fidelity, PIMCO, T Rowe Price and Vanguard have minimum investments of $2500 to $3000 for funds that you'll keep in your personal portfolios, there are literally thousands of mutual funds--stock as well as bond funds---with initial minimum investment requirements of $500 or less.

To help you find the names of funds that have initial minimum investment requirements of $500, or less, I asked Lipper, Inc. to do the research. The results? About 600 funds have initial minimum investments of $100 or less; roughly 430 require at least $250 to open an account; and over 1300 ask for $500. A few of the fund families i in the roster include AIM, GE Funds, Putnam, SunAmerica and Waddell & Reed.

There is, however, more than one way to skin the '"how much does it take to get into a fund" game. Most fund families allow investors to open an account with fewer dollars provided you agree to place a fixed amount of money into that account each month until the minimum investment requirement dollar amount is reached. After that, you can keep on making monthly investments, if you want to.

And, the initial minimum investment requirements when opening a qualified retirement account, such as an IRA or 401 (k), are often less than those required in personal accounts. So, if the fund you've an interest in needs more cash to open an account than you have available, don't despair. Think of adding that fund to your retirement account, or start investing in it via the fund's monthly investment plan program.

To find a listing of the stock and bond funds with minimum initial investment requirements of $500 or less--- along with the fund's investment objective, toll-free telephone number, and symbol---visit www.allaboutfunds.com. Then, click-on, Stock/bond funds minimum investment requirements in the middle of the home page.

Speaking of the cost of getting into a fund, Fidelity is dropping the 3 percent upfront sales charge it places on its sector funds.

There are 42 sector funds included in this change; all fall under the Fidelity Select Portfolios umbrella name.

Upfront sales charges have also been dropped on five of Fidelity's big time funds, including the Magellan fund.


On another subject, in light of the allegations made by New York Attorney General Eliot Spitzer regarding a handful of fund families allowing a hedge fund market-timing privileges and illegal late trading opportunities, Morningstar---the Chicago-based securities research firm---has recommended investors avoid the in-house funds of the families named in the allegation. Those fund families include Bank of America, Janus, Strong and Bank One.

Not to diminish the seriousness of these allegations and the wrongdoings, before unloading any of the funds you own from the fund families involved, take a little time to think before you act.

Hopefully, the individuals who encouraged and allowed the late trading to take place will be fired, and the fund families permitting market-timing punished. Making nice to shareholders and gaining back their trust, however, will be a far grander task.

That said, as fund investors you know how long it takes to find a fund that meets your investment criteria and performs in an acceptable fashion for your needs. So if you're a shareholder in any of the fund families mentioned, think about the funds you own, why you purchased them in the first place, evaluate how well they have worked for you and what other similar fund choice there are before making a quick decision to sell. Not doing so could mean tossing the baby out with the bathwater.


Dian Vujovich is a nationally syndicated mutual fund columnist, author of a number of books including Straight Talk About Mutual Funds (McGraw-Hill), and publisher of this web site.

To read more articles, please visit the column archive.

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