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?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  2. What action is the SEC likely to take on 12b-1 fees?

    The Securities and Exchange Commission (SEC) may take action to impose greater regulation on how 12b-1 fees are used, or ... Read Full Answer >>
  3. What is considered a reasonable 12b-1 fee?

    A reasonable 12b-1 fee is generally considered to be 0.25% of the assets of the mutual fund. The maximum amount allowed for ... Read Full Answer >>
  4. What are some of the most common mutual funds that give exposure to the retail sector?

    There are a number of mutual funds that give exposure to the retail sector. Three of the most popular funds are the Fidelity ... Read Full Answer >>
  5. What is the 12b-1 fee meant to cover?

    A 12b-1 fee in a mutual fund is meant to cover the fees of companies and individuals through which investors of a fund buy ... Read Full Answer >>
  6. What are the most popular mutual funds that give exposure to the utilities sector?

    Some of the most popular mutual funds that provide exposure to the utilities sector include American Century Utilities, Prudential ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    How Hedge Funds Front-Run Index Funds to Profit

    Understand what front running is, and learn how hedge funds use this investing strategy to profit from the anticipated stock buys of index funds.
  2. Mutual Funds & ETFs

    Top 5 Chinese Mutual Funds

    Learn about some of the most popular and best performing mutual funds that offer investors exposure to the important emerging market economy of China.
  3. Investing Basics

    What is a Settlement Date?

    A settlement date is the day a security trade must be settled.
  4. Investing Basics

    Explaining Risk-Adjusted Return

    Risk-adjusted return is a measurement of risk for an investment or portfolio.
  5. Investing

    Five Things to Consider Now for Your 401(k)

    If you can’t stand still, when it comes to checking your 401 (k) balance, focus on these 5 steps to help channel your worries in a more productive manner.
  6. Professionals

    Are Hedge Fund ETFs Suitable for Your Portfolio?

    Are hedge fund ETFs right for you? Here's what investors need to consider.
  7. Investing Basics

    How AQR Places Bets Against Beta

    Learn how the bet against beta strategy is used by a large hedge fund to profit from a pricing anomaly in the stock market caused by high stock prices.
  8. Professionals

    Index or Target Dates in 401(k)s: Which is Better?

    A common question is whether or not plan participants should choose index or target date funds in a 401(k). The answer depends on different scenarios.
  9. Investing

    6 Reasons Why Every Investor Should Consider ETFs

    Once you understand the benefits of ETFs, you’ll see how they could be an exciting and smart way to help meet your financial goals. Here some key facts.
  10. Term

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Exchange-Traded Mutual Funds (ETMF)

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

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

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

    The absolute level of a fund's investments.

You May Also Like

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!