No minimum investment mutual funds

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Beginning investors are better off investing in one or two mutual funds that track a broader market. If you’re new to the investing game and don’t have a ton to invest, these five funds will start you off on the right foot.

You can also check in with a robo-advisor and have them do most of the work for you. I recommend Wealthfront since you can pick from expertly vetted portfolios (or take a DIY approach when you feel confident enough to do so).

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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.

Investing in mutual funds

Some things to consider before investing in mutual funds: Choices: There is a huge variety of mutual fund for investors to choose from today that span across many asset classes, such as stock and bonds, and investment styles, such as value, growth, or dividend investing. Diversification: Many investors add mutual funds to their portfolio to mitigate risk from other holdings or simply diversify their overall portfolio. Access: Mutual funds give investors access to equities that would normally be out of reach for investors with a small amount of capital. Professional Management: Investors that don’t want to manage a large batch of holdings on their own can delegate the responsibility to fund managers will monitor, adjust and reallocate as needed. Many No-Transaction-Fee Funds: There are hundreds of no-transaction-fee (NTF) funds to choose from—you can easily find the best one for your respective strategies and goals.

Types of mutual funds

Mutual funds come in a variety of types and are categorized by the type of investments they own – stock funds, bond funds, money market funds, balanced funds and target date funds.

Stock mutual funds

Stock mutual funds own stocks exclusively, giving them the potential for greater volatility – both higher overall returns and lower overall returns than other types of mutual funds. Included among stock mutual funds are some of the most popular index funds, where the fund is based on the Standard & Poor’s 500 index of top U.S.-based companies. From here they may be further divided into funds focused on growth stocks, value stocks or some combination of the two.

Bond mutual funds

Bond mutual funds own bonds exclusively, making them generally less volatile than stock funds. But they’re also likely to deliver lower returns over time than their stock-based counterparts.

Money market mutual funds

These mutual funds own safe securities such as cash and very short-term debt, making them generally safer than either stock- or bond-based mutual funds but also lower-return. That said, unlike FDIC-backed money market accounts at a bank, money market mutual funds can lose principal, meaning it’s possible, though not likely, that you won’t get your whole investment back.

Balanced mutual funds

These mutual funds can invest in stocks, bonds and money market instruments, and generally can offer lower volatility in exchange for lower overall returns. How much is allocated to each type of asset class depends on the fund’s investment manager and its expectations for return.

Target-date mutual funds

Target-date mutual funds are popular in 401(k) accounts, and they typically invest in stocks, bonds and money market instruments. Investors pick when they want to access their money (say, at retirement) and then the target date fund selects investments that are appropriate for that time period, reducing risk as the investor nears the target date. Usually this means the fund shifts investments from higher-risk (but high-return) stocks to lower-risk bonds over time.

Through an IRA

IRAs are designed to allow you to save for your eventual retirement over a long period of time. Many mutual fund companies lower initial investment requirements for an IRA, or even eliminate the minimum if you commit to regular automatic deposits through payroll deduction or electronic withdrawal from your checking account.

Whats the difference between mutual funds and ETFs?

Mutual funds and ETFs both allow investors to purchase diversified baskets of securities at a relatively low cost, but there are some key differences between the two fund-types.

Mutual funds are more likely to be actively managed than ETFs, which is why they come with slightly higher average fees. You could also end up paying a sales commission for some mutual funds. An initial investment of a few thousand dollars is typically required for mutual funds, whereas an ETF can be purchased for the price of one share. Some ETFs allow fractional shares to be purchased, which means you can start investing with just a few dollars.

One of the main differences between mutual funds and ETFs is in the way they’re traded. Mutual funds can only be bought and sold at the end of the day at the fund’s closing NAV, while ETFs trade throughout the day similar to the way stocks trade.

TIAA-Cref Equity Index (TINRX)

  • Expenses: 0.33%.
  • Turnover: 11%.
  • Min. Investment: $2,500.

Although Vanguard’s mutual funds are synonymous with simple, low-cost investing, this TIAA-Cref fund is proof that good, low-cost index mutual funds exist elsewhere. This fund holds a portfolio that closely tracks the US equities market.

Why trade mutual funds with E*TRADE?

We let you choose from thousands of mutual funds. And to help make the choice easier, we offer tools that let you quickly find the funds that may help meet your goals.

  • Choose from more than 7,000 mutual funds—many with no loads and no transaction fees
  • Use our Fund Screener to quickly find the right choices for your portfolio—and check our All-Star Funds5 list to find top performers, or view mutual funds with no loads and no transaction fees
  • With as little as $25 per recurring investment, automatic investing gives you access to no-load, no-transaction-fee mutual funds by purchasing shares at regular intervals and in equal amounts6
  • Get guidance from our Financial Consultants7

How are ETFs and mutual funds different?

ETFs ETFs Mutual Funds Mutual Funds How are they managed? ETFs While they can be actively or passively managed by fund managers, most ETFs are passive investments pegged to the performance of a particular index. Mutual Funds Mutual funds come in both active and indexed varieties, but most are actively managed. Active mutual funds are managed by fund managers. How are they traded? ETFs ETFs trade like stocks and are bought and sold on a stock exchange, experiencing price changes throughout the day. This means that the price at which you buy an ETF will likely differ from the prices paid by other investors. Mutual Funds Mutual fund orders are executed once per day, with all investors on the same day receiving the same price. What’s the minimum investment? ETFs Because they trade like stocks, ETFs do not require a minimum initial investment and are purchased as whole shares. You can buy an ETF for the price of just one share, usually referred to as the ETF’s “market price.” Mutual Funds Minimum initial investments for mutual funds are normally a flat dollar amount and aren’t based on the fund’s share price. Unlike ETFs, mutual funds can be purchased in fractional shares or fixed dollar amounts. What are the costs? ETFs ETFs have implicit and explicit costs. While your broker will disclose the cost of trading commissions and the ETF provider will disclose the operating expense ratio, don’t overlook the bid/ask spread and premium/discount to NAV. These costs are implicit and result from buying or selling an ETF in the market at a price which may differ from the value of the ETF’s underlying holding.  Read ETFs: How much do they really cost? Mutual Funds Mutual funds can be purchased without trading commissions, but in addition to operating expenses they may carry other fees (for example, sales loads or early redemption fees. What about tax efficiency?  ETFs ETFs often generate fewer capital gains for investors since they may have lower turnover and can use the in-kind creation/redemption process to manage the cost basis of their holdings. Mutual Funds A sale of securities within a mutual fund may trigger capital gains for shareholders—even for those who may have an unrealized loss on the overall mutual fund investment.

Proving what it means to put value first

At Fidelity, we’re committed to giving you value you can’t find anywhere else. That’s why we introduced zero expense ratio index mutual funds.2 We also offer zero minimum investment Fidelity Mutual Funds, no minimums to open an account,3 no account fees for retail brokerage accounts, and 24/7 live customer service — now that’s value.