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Part: 4 Your Choice: Alternatives to Mut... > Comparing Mutual Funds With Separate...

Chapter 26. Comparing Mutual Funds With Separate Accounts

Separate accounts combine into one fee-based alternative the convenience of a mutual fund with the control of a brokerage account. However, there is a big difference between mutual funds and separate accounts that becomes important for a number of investors. Many mutual funds require an initial investment in the range of $2,000 to $3,000, and in some cases the amount can be as low as $1,000. (Initial investments are even lower for retirement accounts.) Separate accounts, on the other hand, typically require a minimum of at least $100,000 to $250,000, and in some cases it could be higher.

As more competition in this area occurs, the minimums will probably drop. Some people argue that separate accounts are more appropriate for investors with at least $500,000 to invest. For example, if you have only $100,000 to invest in a managed account, you would end up with a portfolio with one investment style. To achieve adequate diversification, most observers think you need at least $500,000 for managed accounts.


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