4 Differences Between Institutional and Retail Investors

Do you ever wondered about what the differences between Institutional and Retail Investors? We got your back.

Who is an investor?

A person or organization who puts money into financial schemes with the expectation of gaining profit is called an investor. As an investor you can use different types of financial vehicles such as mutual funds, stocks, commodities, ETFs (exchange-traded funds) commodities, silver, gold, or real estate, the list can go on and on. The main goal of any investor is to minimize risk and maximize returns.

Types of investors

1. Retail or Individual investor

Retail investors, also being called individual investors, they are non-professional investors who invest in assets and securities such as mutual funds, stocks, ETFs, bonds on their own. They can only trade through another party such as brokerage firms, investment managers, investment advisors.

2. Institutional Investors

Institutional investors is a large company or organization that make investments on the behalf of shareholders or individual members. They use pooled resources in order to trade in large quantities and it ensures lower fees. As institutional investors purchase securities and financial assets very large scale compared to retail investors, they also have much more greater influence on the financial markets and the economies of nations.

What are the differences?

Retail Investors:

– Invest comparatively small amount of money

– Fees on their trades, as well as marketing and higher commissions

– Less skilled and have few knowledge

– Driven by personal goals such as planning for retirement, saving up for their child’s education

Institutional Investors:

– Invest and manage other people’s money on their behalf

– Deal with large amount money which can affect the stock market

– Specialist at investing, have wide range of skillset and information sources

– Can often negotiate better fees on their investments

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