THERE ARE A LOT

of issues that prevent investors from putting their money in certain mutual funds, including poor performance, hefty fees or an unproven manager. But one facet that often goes overlooked regardless of whether the fund is a good one or a bad one is the upfront minimum investment that every offering requires a prospective shareholder to make.

With few exceptions throughout the year, the Smartmoney.com fund screen typically weeds out candidates with minimum investment requirements over $5,000. While that cutoff isn't exactly arbitrary it also isn't terribly scientific either: We think most investors can afford this amount and that dollar figure also happens to be at the high end of an average range $2,500 to $5,000 levied by some of our favorite funds.

However, we do realize scraping together that much cash isn't easy for everyone. That's why for this week's screen we went looking for low-minimum funds that have good performance, too. Regular readers of this column will be familiar with many of the 19 domestic equity funds that survived our cut. Hodges, Homestead Value, Excelsior Value & Restructuring and Amana Growth have made other of our performance-based screens. The entire group which requires less than $500 to gain entry returned an average annual 11.7% over the last five years compared with 8.4% for the S&P 500 during that same time period.

Low-minimum funds can be an ideal initial investment for people just starting to save or for those that don't have a lot of free cash flow because they have other priorities, like a growing family. Even if you are comfortably invested in other mutual funds, the small minimums the offerings below call for could help you pick up decent funds that will round out your portfolio without draining your bank account. Almost every flavor of mutual fund is on this week's list.

But that doesn't mean you should always kick to the curb a fund that requires a high initial investment. While low minimums can be a good way to attract investors to a fund, a high minimum can have the opposite effect. That's actually a good thing in the long run. The more shareholders a fund has the more money it needs to spend to print its quarterly and annual reports and mail them out. So high minimums can actually help a fund cut costs.

"A lower minimum often means more shareholders," says Lipper senior analyst Jeff Tjornehoj. "That means more record keeping and potentially higher ongoing expenses." Vanguard also skillfully uses high minimums to cool off a red-hot fund that is seeing a surge in investors or to keep a well-established one from ballooning in size. And in many cases, if you agree to make regular contributions through a retirement account like an IRA, many high-minimum funds will waive that barrier. An advisor can also typically get around that initial cost. "Those high minimums usually only apply to run-of-the-mill retail accounts," says Tjornehoj.

The list this week is a mixed bag of funds that span the investment spectrum. The Amana funds and New Covenant Balanced Income are two religiously-themed funds. Excelsior Value & Restructuring places bets on companies that are in turnaround mode. State Farm Growth is a super cheap (annual expenses are just 0.12%), large-company fund with a compact portfolio of 80 companies. Some of its top holdings include Exxon Mobil, Hewlett-Packard and Biomet. It requires just $250 upfront. But alas, only employees of State Farm can buy it, says Morningstar's Todd Trubey. "For them it's a worthy investment," he says in his recent write-up on the fund.

One of our favorites this week is Hodges. Don Hodges, who has 46 years of investment experience, describes his stock-picking strategy as "eclectic." This multicap fund invests in both blue-chip stocks that are trading at a discount and growth fare that should see their earnings increase at a pace that exceeds the broad market. That might seem like an unfocused strategy to some investors, but it has worked well here. The fund owned railroad Burlington Northern Santa Fe long before investors started clamoring for stocks like it recently. Burlington is up 29% in 2007. The fund has returned an average annual 20.5% over the last five years, 12 percentage points better than the S&P 500.

The Criteria
This week we initially trimmed the universe of domestic equity funds by lowering our minimum investment to $500 or less. We then added in three- and five-year performance that put the funds in the top 40% of their peer groups. Finally, the funds couldn't have a sales load, had to be open to new money and charge annual expenses under 1.5%.