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What is a 'Mom-and-Pop'

"Mom-and-pop" is a colloquial term for a small, family-owned or independent business. These types of businesses sometimes have difficulty competing with a more substantial company's buying power.

"Mom-and-pop" also refers to inexperienced investors who play the market casually and rely on brokers to manage their portfolios.

BREAKING DOWN 'Mom-and-Pop'

Historically, "mom-and-pop" was used to describe local general stores or drugstores, often owned and operated by a family. Today, mom-and-pop establishments are synonymous with several different businesses types, such as restaurants, local bookstores, automotive repair shops, and insurance agencies.

Many mom-and-pop businesses experience difficulty in competing with large corporations, e-commerce, and franchise businesses. As a result, the closure of these small businesses is frequent. Corporations enjoy economies of scale, significant capital for investments, and more massive advertising budgets, among other things, giving them a competitive advantage.

Mom-and-Pop Businesses

With the help of technology and a consumer population demanding more personalized products and services, mom-and-pop businesses are gaining popularity. The internet helps to expand their target audience and geographical reach. Additionally, mom-and-pop businesses are gaining popularity because many local consumers want their money to stay within their community and to promote local economic growth. The following of Small Business Saturday is growing. The event is held the Saturday after U.S. Thanksgiving and has become an American shopping holiday that focuses on shopping locally. 

Mom-and-pop business owners are seen as having a vested interest in the community, its citizens, and the local economy.  As a result, service is highly interactive and personalized. This personalized service is often difficult for large corporations to replicate.  Their superior level of customer service enhances brand image and increases brand loyalty among consumers.

Mom-and-Pop Investors

"Mom-and-pop" also refers to an inexperienced investor who minimally invests in the stock market. Despite limited or small up-front investments, mom-and-pop investors often expect to receive significant returns or substantial profits from trades to supplement their income. Many mom-and-pop investors are also not current with market research and react negatively to market changes. They are usually most affected by significant market fluctuations as they try to play "catch-up" when entering or leaving a trade.  

Because of their inexperience, they typically hire a broker to facilitate trades or use one of the many online trading platforms. The internet provides opportunities for more people to invest and has substantially increased the number of mom-and-pop investors.  Simultaneously, it provides a means for investors to become educated about their investments. Online trading platforms have widened the selection of brokers available to aid mom-and-pop investors with investments and education.

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