Getting In: Starting Low Initial Investment Mutual Funds

Sometimes investing can be a high cost activity, this has led to the desire for many investors to seek low initial investment mutual funds. Since many investors would prefer to lower their investing risk, they choose to invest in diverse portfolios instead of invest in specific securities such as stocks or options. However, the main problem with this strategy is that many of these diverse portfolios require a substantial initial investment of capital. This article will cover different strategies that you can undertake in order to find and invest in low initial investment mutual funds.

The Reason for the Large Investment

The reason for this high initial amount is because funds attempt to minimize the overall risk of the portfolio by investing in different types of securities. As such, it requires much more money (or also commonly referred to as assets under management) to be able to purchase all these different securities. For example, if you wanted to minimize the risk of your portfolio by choosing 20 different securities and if each of these securities had an average price of $100, your initial investment would amount to $2,000. And this is assuming that you are only purchasing one share of each of these 20 securities!

Different Funds for Investing Preferences

Luckily, there are different types of mutual funds that you can consider for a low initial investment. Many funds cater to investors with different investing preferences in investing. Instead of attempting to create your own personal fund, which could cost thousands of dollars in order to effectively minimize the risk, you should search for funds that reflect your level of aversion to risk. In essence, you want to find a fund that invests in the same types of securities you would like to invest in yourself.

As an example, many experienced or more risky investors might be interested in investing in a hedge fund. However, hedge funds are a type of mutual fund that cater to high risk and high net worth individuals only. Fortunately, you can minimize this risk slightly and greatly minimize the required initial investment by choosing a hedge fund of funds. Basically, these are funds that combine the performance of many different hedge funds in order to provide you with a low-cost alternative. This can be a great opportunity for investors wishing to participate in the excitement of hedge funds who can unfortunately not meet the initial capital requirements from any individual hedge fund.

Finding a Good Deal

Next, you will want to look for funds that advertise a low initial investment. However, you should also be cautious about some of the other costs associated with these types of funds. Always compare performance fees, as well as base pay, with other funds. You want to make sure that you are getting a good deal before immediately choosing your fund based on the lowest initial investment you can find. You should also make sure that there are no hidden costs such as withdrawal costs. Many funds will charge you a certain amount if you choose to withdraw your money earlier than stated in the contract.

Finding a low initial investment mutual fund does not need to be a stressful task. Simply follow the tips above and you should be able to find the best deals for your money.

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