Meaning of investor: Who is the investor and what are the types of investors?
An investor means any person or entity that relies on various financial instruments to earn returns and achieve their long-term financial goals such as building retirement savings, funding college education, or even amassing side wealth.
There are a variety of investment tools that the investor uses to achieve his goals, including stocks, bonds, commodities, mutual funds, exchange-traded funds, futures, foreign currencies, gold, silver, retirement plans, real estate, and so on. An investor usually studies various opportunities from all angles with the aim of minimizing risks and maximizing returns.
Remember that an investor and a trader are two completely different things though they have some superficial similarities, an investor uses capital for long-term gains, while a trader seeks short-term profits by buying and selling securities over and over again.
Understand the meaning of the investor
Investors do not belong to a unified group, each investor has his own capital, patterns and preferences. Some of them may, for example, prefer low-risk investments such as certificates of deposit and some bond products, while others prefer to take additional risks in order to achieve greater profit. They may invest in currencies, emerging markets, stocks, etc.
Institutional investors are organizations such as financial companies or mutual funds, which build large portfolios in stocks and other financial instruments. Institutional investors usually pool money from several small investors in order to use it for larger investments. So they often have great power and influence on the market.
Passive investors and active investors
Another factor that differentiates investors from each other is the different market strategies that each investor adopts. Passive investors tend to buy and hold components of various market indices, while active investors invest based on fundamental analysis of companies’ financial statements and financial ratios.
One common example of an active investing approach is investors who seek to buy stocks that have a lower share price compared to their book values. Passive investors often invest in “growth” stocks that may be losing money right now but are growing rapidly and showing promise in the future.
It is true to say that the meaning of the passive investor has overtaken active investment strategies as the dominant logic of the stock market. The growth of low-cost target-date mutual funds and exchange-traded funds contributes greatly to the popularity of passive investments.
Disclaimer: The content of this article is for informational purposes only. The information provided should absolutely not be considered as investment advice or a recommendation. No warranty is made, express or implied, as to the accuracy of the information or data contained herein. Users of this article agree that Money Secrets does not accept responsibility for any of their investment decisions. Not every investment or trading strategy is suitable for anyone. See the risk warning statement.