A:

There are a number of differences between institutional investors and non-institutional investors. If you are considering an investment in a particular stock that you've seen publicized in the financial press, there's a good chance you don't qualify as an institutional investor. In fact, if you're wondering what an institutional investor is, you're probably not an institutional investor.

Institutional investors are the big guys on the block - the elephants. They're the pension funds, mutual funds, money managers, insurance companies, investment banks, commercial trusts, endowment funds, hedge funds, and some hedge fund investors. Institutional investors account for half of the volume of trades on the New York Stock Exchange. They move large blocks of shares and have tremendous influence on the stock market's movements. Because they're considered to be knowledgeable and, therefore, less likely to make uneducated investments, institutional investors are subject to few of the protective regulations that the Securities and Exchange Commission provides to your average, everyday investor. (See Policing The Securities Market: An Overview Of The SEC.)

The money that institutional investors use isn't actually money that the institutions have raised themselves. Institutional investors generally invest for other people. If you have a pension plan at work, a mutual fund or insurance, then you are actually benefiting from the expertise of institutional investors.

Non-institutional investors are, by definition, any investors that aren't institutional. That's pretty much everyone who buys and sells debt, equity or other investments through a broker, bank, real estate agent and so on. These are the people or organizations that manage their own money, usually to plan for retirement or to save for a large purchase.

To find out more, read Institutional Investors And Fundamentals: What's The Link?

RELATED FAQS

  1. Is there a situation in which wash trading is legal?

    Learn about what wash trading is and how it can affect the value of a stock. Explore the difference between wash trading ...
  2. What action is the SEC likely to take on 12b-1 fees?

    Read about what actions the SEC may take with regard to 12b-1 fees, and for what purposes these types of fees can be used ...
  3. What is considered a reasonable 12b-1 fee?

    Learn what is generally considered to be a reasonable 12b-1 fee, what these fees are charged for and how these fees are regulated.
  4. What are some of the most common mutual funds that give exposure to the retail sector?

    Obtain information on some of the most popular and best performing mutual funds that investors use to gain exposure to the ...
RELATED TERMS
  1. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  2. Tactical Trading

    A style of investing for the relatively short term based on anticipated ...
  3. Maximum Drawdown (MDD)

    The maximum loss from a peak to a trough of a portfolio, before ...
  4. Gross Exposure

    The absolute level of a fund's investments.
  5. Dividend

    A distribution of a portion of a company's earnings, decided ...
  6. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...

You May Also Like

Related Articles
  1. Investing Basics

    Shareholders: Vote Your Proxy and Be ...

  2. Stock Analysis

    AT&T: Just Boring Or Bad?

  3. Professionals

    Worried About Stocks? Try on Convertibles

  4. Mutual Funds & ETFs

    Looking To Invest In Texas? Here Is ...

  5. Mutual Funds & ETFs

    4 Ways You Can Invest In Gold Without ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!