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}} Template:Capitalism Template:Financial market participants

An investor[1] is a person that allocates capital with the expectation of a future financial return (profit) or to gain an advantage (interest).[2][3] Through this allocated capital most of the time the investor purchases some species of property.[4] Types of investments include equity, debt, securities, real estate, infrastructure, currency, commodity, token, derivatives such as put and call options, futures, forwards, etc. This definition makes no distinction between the investors in the primary and secondary markets. That is, someone who provides a business with capital and someone who buys a stock are both investors. An investor who owns a stock is a shareholder.

Essential quality

Investors can include stock traders but with this distinguishing characteristic: investors are owners of a company which entails responsibilities.[5]

Types of investors

There are two types[6] of investors, retail investors and institutional investors:

Retail investor

  • Individual investors (including trusts on behalf of individuals, and umbrella companies formed by two or more to pool investment funds)
  • Angel investors (individuals and groups)
  • Sweat equity investor[7]

Institutional investor

  • Pension plans making investments on behalf of employees
  • Businesses that make investments, either directly or via a captive fund
  • Endowment funds used by universities, churches, etc.
  • Mutual funds, hedge funds, and other funds, ownership of which may or may not be publicly traded (these funds typically pool money raised from their owner-subscribers to invest in securities)
  • Sovereign wealth funds
  • Large money managers[8]

Investors might also be classified according to their styles. In this respect, an important distinctive investor psychology trait is risk attitude.

Investor protection

The term "investor protection" defines the entity of efforts and activities to observe, safeguard and enforce the rights and claims of a person in his role as an investor. This includes advice and legal action. The assumption of a need of protection is based on the experience that financial investors are usually structurally inferior to providers of financial services and products due to lack of professional knowledge, information or experience. Countries with stronger investor protections tend to grow faster than those with poor investor protections. Investor protection includes accurate financial reporting by public companies so the investors can make an informed decision. Investor protection also includes fairness of the market which means all participants in the market have access to the same information.

Through government

Investor protection through government involve regulations and enforcement by government agencies to ensure that market is fair and fraudulent activities are eliminated. An example of a government agency that provides protection to investors is the U.S. Securities and Exchange Commission (SEC), which works to protect reasonable investors in America.[2]

As individuals

Investor protection through individual is the strategy that one utilizes to minimize loss. Individual investors can protect themselves by purchasing only shares of businesses that they understand, or only those that remain calm through market volatility. An individual investor may be protected by the strategy he uses in investment. The strategy includes an appropriate price of the stocks or assets in the right time he enters. It's hard to fix what "an appropriate price" is, and when it is appropriate because no one makes a purchase or a sale absolutely in his most favorable situation. However, determination may be made when the price of such share or assets are "undervalued" comparing to its potentiality. This is called the margin of safety where an investor can feel at ease when the price of the stocks is alarmingly down.

Investment tax structures

While a tax structure may change, it is generally accepted that long-term capital gains will maintain their position of providing an advantage to investors. This is countered by the opinion that after-tax returns should be considered, especially during retirement, on the basis that allocation to equities is in general, lower, than any returns and should be maximized, to the most lucrative extent. In the current circumstances, long-term capital gains offer one of the best opportunities in the United States tax structure.

It is made easier for investors to generate long-term capital gains by the employment of exchange-traded funds (ETFs), the process of investment in broad-based index funds, without required indicators. Although some outlandish ETFs could provide investors with the opportunity to venture into previously inaccessible markets and employ different strategies, the unpredictable nature of these holdings frequently result in short-term transactions, surprising tax equations and general performance results issues.

Company dividends are paid from after-tax profits, with the tax already deducted. Therefore, shareholders are given some respite with a preferential tax rate of 15% on "qualified dividends" in the event of the company being domiciled in the United States. Alternatively, in another country having a double-taxation treaty with the US, accepted by the IRS;. Non-qualified dividends paid by other foreign companies or entities; for example, those receiving income derived from interest on bonds held by a mutual fund, are taxed at the regular and generally higher rate of income tax. When applied to 2013, this is on a sliding scale up to 39.6%, with an additional 3.8% surtax for high-income taxpayers ($200,000 for singles, $250,000 for married couples).[9]


A disciplined and structured investment plan prevents emotional investing which can be related to impulsive buying. This factor can be utilized to counteract the sentiments of a marketplace, which is often reflective of the emotional state of an entire population. Short-term activity in stock prices or the broader markets can frequently be compared to impulsive actions. This is seen in the term "bull run" which can induce investors to leap into an investment, as opposed to a "bearish market" that could influence a "sell-off". It is these types of market scenarios that can cause investors to abandon their investment strategies. Investor discipline is the ability to maintain an investment strategy even in the most tempting, or extreme conditions in the marketplace.

An established and popular method for stock market investors is Systematic Investment Plans (SIPs) especially for those who have a regular, monthly surplus income. The provision for reaping maximum benefits from these plans is that a disciplined strategy is maintained, one of the foremost advantages for a successful investor. Consistency is closely associated with an investment strategy and can be related to various, adopted, proven techniques; for example, predicting outperforming funds, valuation, or a technical strategy. A strategic advantage that meets the required consistency is long-term investment, which in turn, offers investors long-term capital gains tax advantages. While many investors try to exercise a long-term disciplined approach, the investment marketplace can provide various, tempting options; for instance, a sudden drop in the marketplace, or a pending worldwide event. This is particularly prevalent for retired investors, who are preserving their capital with care.

Role of the financier

A financier (/fɪnənˈsɪər, fə-, -ˈnæn-/)[10][11] is a person whose primary occupation is either facilitating or directly providing investments to up-and-coming or established companies and businesses, typically involving large sums of money and usually involving private equity and venture capital, mergers and acquisitions, leveraged buyouts, corporate finance, investment banking, or large-scale asset management. A financier makes money through this process when his or her investment is paid back with interest,[12] from part of the company's equity awarded to them as specified by the business deal, or a financier can generate income through commission, performance, and management fees. A financier can also promote the success of a financed business by allowing the business to take advantage of the financier's reputation.[13] The more experienced and capable the financier is, the more the financier will be able to contribute to the success of the financed entity, and the greater reward the financier will reap.[14] The term, financier, is French, and derives from finance or payment.

Financier is someone who handles money. Certain financier avenues require degrees and licenses including venture capitalists, hedge fund managers, trust fund managers, accountants, stockbrokers, financial advisors, or even public treasurers. Personal investing on the other hand, has no requirements and is open to all by means of the stock market or by word of mouth requests for money. A financier "will be a specialized financial intermediary in the sense that it has experience in liquidating the type of firm it is lending to".[12]


Economist Edmund Phelps has argued that the financier plays a role in directing capital to investments that governments and social organizations are constrained from playing:

[T]he pluralism of experience that the financiers bring to bear in their decisions gives a wide range of entrepreneurial ideas a chance of insightful evaluation. And, importantly, the financier and the entrepreneur do not need the approval of the state or of social partners. Nor are they accountable later on to such social bodies if the project goes badly, not even to the financier's investors. So projects can be undertaken that would be too opaque and uncertain for the state or social partners to endorse.[15]

The concept of the financier has been distinguished from that of a mere capitalist based on the asserted higher level of judgment required of the financier.[16] However, financiers have also been mocked for their perceived tendency to generate wealth at the expense of others, and without engaging in tangible labor. For example, humorist George Helgesen Fitch described the financier as "a man who can make two dollars grow for himself where one grew for some one else before".[17]

Guidelines of specific investors

Specific investment practices are suggested to maintain an ethical behavior based on principles universally accepted.[18]

Socially responsible investing

Socially responsible investing any investment strategy which seeks to consider both financial return and positive impacts on people and the planet.[19] It is recommended in all types of investment by supporters of socially responsible investing.[20]

See also

Further reading

  • Matthew Josephson, The Money Lords; the great finance capitalists, 1925–1950, New York, Weybright and Talley, 1972.
  • Graham, Benjamin; Zweig, Jason (2003) [1949]. The Intelligent Investor. Harper Collins. ISBN 0-06-055566-1


  2. 2.0 2.1 Lin, Tom C.W. (2015). "Reasonable Investor(s)". Boston University Law Review 95 (461): 466. 
  3. "INVESTOR definition in the Cambridge English Dictionary". Cambridge University Press. 
  4. Jonathan Fisher QC, Jane Bewsey, Malcolm Waters QC, Elizabeth Ovey (2003): The Law of Investor Protection. 2nd edition. London: Sweet & Maxwell
  5. "Looking at Corporate Governance from the Investor's Perspective". April 21, 2014. 
  6. Palmer, Barclay. "Institutional vs. Retail Investors: What's the Difference?". 
  7. Hayes, Adam. "Retail Investor Definition" (in en). 
  8. "Institutional Investor - Overview, Types, Investing Risks" (in en-US). 
  9. "Investment Tax Basics for All Investors". 
  10. Company, Houghton Mifflin Harcourt Publishing. "The American Heritage Dictionary entry: financier". 
  11. "financier | meaning of financier in Longman Dictionary of Contemporary English | LDOCE". 
  12. 12.0 12.1 Xavier Freixas, Jean-Charles Rochet, Microeconomics of Banking (2008), p. 227.
  13. Hans Landström, Handbook of Research on Venture Capital (2007), p. 202.
  14. Edwin H. Neave, Modern Financial Systems: Theory and Applications (2009), p.8,
  15. Edmund S. Phelps (October 10, 2006). "Dynamic Capitalism". Europa-Institut. 
  16. Sterling Elliott, ed., Good Roads: Devoted to the Construction and Maintenance of Roads (1896), Vol. 24, p. 366.
  17. George Fitch, Vest Pocket Essays (1916), p. 123.
  18. "Investing as a Christian: Reaping where you have not sown by Paul Mills - Jubilee Centre". 17 June 1996. 
  19. Bhaduri, Saumitra N.; Selarka, Ekta (2016), "Corporate Governance and Corporate Social Responsibility—Introduction", CSR, Sustainability, Ethics & Governance (Singapore: Springer Singapore): pp. 1–10, doi:10.1007/978-981-10-0925-9_1, ISBN 978-981-10-0924-2,, retrieved 2020-12-17 
  20. Domini, Amy (2011-03-15). "Want to Make a Difference? Invest Responsibly". BuzzFeed. 

External links

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