Types of Investors and the steps of the Investment Process

Types of Investors

Before we fully understand the investment process, we have to know the types of investors taking part in the investment process. To recup, An investor is someone who provides his or her money or resources for an enterprise, such as a corporation, with the expectation of financial or other gain at a later date in time. The main types of investors in the typical investment environment are the individual investors and the institutional investors.

Read also: Types of Investments that form an investment portfolio

  • Individual Investors: these are investors who Invest for personal financial goals such as retirement, car or house. They can also be refered to as retail investors. A retail investor is an individual who purchases securities for his or her own personal account rather than for an organization. Retail investors typically trade in much smaller amounts than institutional investors such as mutual funds, pensions, or university endowments.
  • Institutional Investors; These are investors who are Paid to manage other people’s money. They usually trade large volumes of securities. 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.

steps of the Investment Process

The investment process starts with the investor, and his or her needs and preferences. To design the “right” portfolio for an investor, we need to understand how much risk he or she is willing to take, what his or her cash needs might be and the tax status of the investor. With this in mind, there are five conventional steps that are  involved in the investment process. Each of the steps are critical and hence therefore, we will discuss each one of them in details in separate posts in their respective order for you to get an in depth understanding of the investment process.

The investment process steps are;

  1. Set investment policy
  2. Perform security analysis
  3. Construct a portfolio
  4. Revise the portfolio
  5. Evaluate performance

Be on the know, read on.


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