Different Groups of Investors

Written by admin on July 17th, 2011

Investors are divided into different groups as they participate on the markets, pursuing various investment strategies. As such sub-divisions and differentiation of investors may follow different criteria:

Private investors, including free investors, often than not are individuals and may or may not have enhanced investment knowledge. Institutional investors tend to be companies such as banks, pension funds, hedge funds, investment companies, etc.

While a private investor invests smaller amounts, institutional investors often invest large sums at regular intervals.

Accordingly, institutional investors usually have considerable experience on the opportunities and risks of various investment products. Hence, they are tend to be subject to less stringent investor protections. And in some jurisdictions, institutional investors referred to as qualified institutional investors.

Institutional investors, may also make a huge investments in organizational and financial institutions. In recent years, mutual funds managed by institutional investors also poured massive inflows of funds into the market. It has become a major trend of various funds that can not be ignored.

Under strategic investment the focus is on the connection of the capital assets in relation to the operations of a business. Examples include:

– Hedging purchases of commodity futures
– Purchase of ownership interests of product portfolio and then expanding the customer base, or merge operational functions and processes (IT, purchasing, production, sales, administration, R & D) in order to benefit from the resulting economy of scale effects.

In stock trading, the form of transactions carried out by individual investors is to buy and sell shares through a form of sales and brokerage office (present transaction) from an online internet connection.

Investment in corporate shares involves the acquisition of shares or equity funds of limited partnership or limited companies. Thus, the investor becomes a shareholder of the company.

The basic investment strategies include:

    – A strategy to purchase at an average price
    – A strategy for a permanent structure of investment capital,
    – Price-indicator strategy.

The strategy to buy shares at an average price of fixed investment involves a sum of money in a specific package of the same shares at a fixed period, eg every half a year for several years.

Regular investing provides buying more shares when they are cheap, and fewer when they are expensive. With this strategy, the investor will never invest all the capital thus taking greater risks.

The strategy of investment capital structure implies that the investor should divide money between bonds and equities. The investor should never have less than 25% and more than 75% in shares, and more than 75% and less than 25% in bonds. And a reason to change this ratio should be  only be guided by a change in the level of prices in the stock market.

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