Finding mutual funds to get started investing for $100 or less can be more challenging than finding the best funds. For this reason, the minimum initial investment hurdle can make the first investment difficult for some investors.
But don't be discouraged. Finding the best no-load mutual funds for $100 or less can be easy if you know where to look.
Mutual Fund Minimum Initial Investments
Mutual funds are without a doubt the best type of investment for the majority of beginning investors, but many funds have minimum initial investment amounts of $3,000 or higher. As a result, beginning investors have to save hundreds or thousands of dollars just to get started investing in mutual funds. This cost hurdle reduces one of the biggest advantages of investing: getting started early.
But there are several fund companies that offer mutual funds with low minimum initial investment amounts. However, there aren't many fund shops that have both low minimums and high-quality no-load funds for the do-it-yourself investor.
Although Vanguard Investments and Fidelity Investments offer some of the best no-load funds on the market, their minimum initial investments for the majority of their funds are $3,000 and $2,000, respectively.
But Charles Schwab has some good funds which require no minimum investment, and Fidelity has a few as well.
Low Initial Investment Mutual Funds
If you're ready to jump in with both feet, here are a few of those mutual funds.
Schwab S&P 500 Index (SWPPX)
It's hard to go wrong with an index fund with no minimum initial investment required and a rock bottom expense ratio of just 0.02%, which rivals that of Vanguard funds. At 100% stocks, investors will need to be able to hold on during the inevitable bear markets, when stock prices can decline by 20% or more in just a few months' time. However, the long-term (more than 10-year) returns of stock index funds are among the most competitive of all mutual fund types.
Schwab Balanced Fund (SWOBX)
Balanced funds can be an ideal way for beginners to start investing because they are a diversified blend (a balance) of stocks, bonds and cash. In other words, balanced funds can be a complete portfolio in themselves. The Schwab Balanced Fund has an asset allocation of roughly 60% stocks, 35% bonds, and 5% cash. This makes for a moderate (medium-risk) blend appropriate for most investors. SWOBX is typically an above-average performer and has no minimum initial investment.
Schwab International Core Equity (SICNX)
If you are wanting to expand your portfolio to include foreign stocks, this fund is among the best of no-load funds with no minimum initial purchase. SICNX invests in large-cap stocks (large companies) that are outside of the United States. Long-term performance ranks are high compared to other large-cap international funds.
Fidelity offers four funds with no minimums to open an account: Fidelity ZERO Large Cap Index Fund (FNILX); Fidelity ZERO Extended Market Index Fund (FZIPX); Fidelity ZERO Total Market Index Fund (FZROX); and Fidelity ZERO International Index Fund (FZILX). All of them also boast a 0% expense ratio. Fidelity also provides 24/7 live customer service and no account fees for retail brokerage accounts.
The Bottom Line
Investors should note that some mutual fund companies offer lower minimum initial investments, such as $100 or lower, when the investor establishes an Individual Retirement Account (IRA) and sets up a systematic investment plan that automatically withdraws at least $100 per month out of a bank account for deposit into the IRA.
But if you do have the opportunity to get into one of these low-initial-investment mutual funds, you should certainly consider taking it. Getting started with investing in a mutual fund early is a great way to built a nest egg that will pay off big years down the road. While there are some disadvantages to mutual funds, such as high fees and capital gains taxes, mutual funds have a solid track record for building wealth over time. However, they come with risk, so you will need to be smart about it.
Now that you have the knowledge, it's time to go out and begin your investing career.
Frequently Asked Questions (FAQs)
How often can I trade Fidelity ZERO funds?
You can trade Fidelity ZERO funds and any other mutual fund as often as you like, but you can only place one trade order per mutual fund per day. That means you can't buy and sell the same fund on the same day—you'd have to buy it one day and sell it the next. This is because mutual fund transactions execute once per day after hours, so you can't trade intraday like you can with stocks, bonds, or ETFs. Also, keep in mind that mutual funds with sales loads could impose fees on each transaction you place.
What is a no-load mutual fund?
Some mutual funds charge sales loads, which are essentially extra fees on the mutual fund. These "loads" may be charged when mutual fund shares are acquired or sold. A "no-load" mutual fund does not charge sales loads, so they help investors to save on costs. These loads are different from commissions, transactions fees, and other costs your broker may charge for trades.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.