Minimum Investment
What It Is:
Minimum investment is the least amount of money an investor must invest to take part in a specific investment.
How It Works/Example:
Many types of investments have a minimum investment, including mutual funds, certificates of deposit (CDs), unit trusts, limited partnerships and hedge funds. Minimum investment can range from a few hundred dollars to several million dollars, depending on the investment.
Why It Matters:
By requiring a minimum investment, investment managers can put a barrier in front of short-term investors who may be inclined to jump in and out of a fund at a moment's notice. It helps provide a certain amount of consistency to the fund manager -- he/she should have a rough idea of how much money is in the fund and available to invest.
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Cached on June 18, 2013, 10:12 pm