How Much Money Do You Need to Invest in Mutual Funds?

Mutual funds section
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So you've decided to buy a mutual fund, but how much do you need to get started investing and what are the minimum investment amounts? In many cases, you'll need thousands of dollars to buy mutual funds. But there are a few exceptions where investors can get started investing with mutual funds for $100 or less.

The exact amount for the minimum initial purchase will primarily depend upon the mutual fund company.

Minimum Money Required for Initial Purchase

Here are amounts you'll need to invest when first buying shares of mutual funds from these top no-load fund companies:

  • Vanguard Funds: $1,000 
  • Fidelity Funds: $0
  • T. Rowe Price Funds: $2,500
  • Charles Schwab Funds: $100

Keep in mind that the above minimums are for the first purchase on most funds offered by the given mutual fund company when the investor is buying in an individual account. Subsequent purchases can be as low as $100 or less. Also, some fund companies accept lower minimums if investing in an IRA or 401(k) plan or when an individual establishes a systematic investment plan.

Therefore, once you make your first purchase, you won't have to come up with hundreds or thousands more before purchasing more shares of the same mutual fund. If you want to gain access to several mutual funds with one purchase, you might consider buying a "fund of funds," which is a mutual fund that invests in other funds. This can provide diversification and keep you from building more money to meet minimums on great funds from companies like Vanguard and Fidelity.

Mutual fund companies also have some share classes that charge higher initial purchases, such as Vanguard's Admiral Shares, which are usually $3,000 for the initial purchase. These shares typically have lower expense ratios, which can give a slight performance edge over long holding periods.

Invest in ETFs as an Alternative to Mutual Funds 

The best alternative to mutual funds is exchange traded funds, also known as ETFs. Mutual funds and ETFs are similar in that they both enable investors to get exposure to dozens or hundreds of securities by purchasing just one fund. The primary difference is that ETFs trade intra-day like stocks, whereas mutual funds only trade at the end of the day.

With regard to fees, ETFs don't have minimums. However, like stocks, ETFs usually have commissions or transaction fees every time you make a purchase. However, investors may be able to trade some ETFs with no commissions or transaction fees.

For example, Fidelity allows investors to trade certain ETFs, such as iShares, for no transaction fee. Vanguard allows their account holders to buy Vanguard ETFs at no commission or transaction fee.

Think Long Term When Investing

Before purchasing mutual funds or ETFs, remember that they are most appropriate for investment periods of at least three years, but a time horizon of more than 10 is best in most cases. Low-cost, diversified mutual funds and ETFs are generally wise choices for almost any investor.