Welcome back to the Bullish Advisor! Have you ever wondered how to set up your portfolio and what types of stocks you should invest in? Well before you learn about the different types of investments, you should first learn what type of investor you are. Knowing your goals, risk tolerance, and time horizon is key to making the right investment decisions for you!
Retail Investor
The retail investor is the everyday non-professional investor like you and me! We usually buy and sell small shares of companies or other types of securities such as mutual funds or exchange traded funds (ETFs). Retail investors typically have a wide range of specialties, and often use various brokerages such as Ameritrade or Robinhood for transactions.
Institutional Investor
When retail investors give their money to mutual funds, the money is given to institutional investors. They pool the money from various retail investors and make investment decisions on their behalf. Oftentimes, the largest shareholders of companies are these institutional investors. Some buy shares with the intent of having eventual voting power while others manage index funds without involvement in company affairs.
Accredited Investor
They meet certain financial criteria such as having a net worth of more than a million dollar (not including the value of a primary property) and having an individual income of at least $200K. Accredited investors are allowed to invest in certain private market opportunities that aren’t in SEC filings and aren’t available for retail investors.
Day Traders
They buy and sell securities (especially stocks) on the same day to capitalize on short term movements in the market. They have a high potential for profit which also comes with a high risk for loss. Day traders heavily rely on technical analysis for their investment decisions. Check out our blog on technical analysis to learn more.
Angel Investors
Angel Investors are affluent investors that give their own money as capital to help fund startups. In return, they get equity or convertible debt. Many provide mentorship to these businesses in their early stages of development. Angel investors take on high amounts of risk. It is stated that 70% of startups fail within the first five years of establishment.
Venture Capitalists
Venture capitalists are backed by risk capital companies that invest in startups with high growth potential. They have less risk as a firm compared to angel investors who give their own money individually. Venture capitalists also diversify their portfolio by investing in multiple startups hoping that a few will succeed.
Conclusion
Understanding the different types of investors is crucial for setting up your investment portfolio and making informed decisions that align with your goals. Stay tuned to Bullish Advisor for more insights and tips on navigating the world of investing and building a robust, diversified portfolio. Happy investing!