An investor is a person who allocates

financial capital Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide ...

with the expectation of a future

return Return may refer to: In business, economics, and finance * Return on investment (ROI), the financial gain after an expense. * Rate of return, the financial term for the profit or loss derived from an investment * Tax return, a blank document or t ...

(profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Types of

investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...

s include

equity Equity may refer to: Finance, accounting and ownership * Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the dif ...

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...

infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...

currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins. A more general def ...

commodity In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a comm ...

, token, derivatives such as put and call options,

futures Futures may mean: Finance *Futures contract, a tradable financial derivatives contract *Futures exchange, a financial market where futures contracts are traded * ''Futures'' (magazine), an American finance magazine Music * ''Futures'' (album), a ...

, forwards, etc. This definition makes no distinction between the investors in the primary and secondary markets. That is, someone who provides a business with capital and someone who buys a stock are both investors. An investor who owns stock is a

shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal own ...

Types of investors

There are two types of investors: retail investors and

institutional investor An institutional investor is an entity which pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked co ...

Retail investor

* Individual investors (including

trusts A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the "settl ...

on behalf of individuals, and umbrella companies formed by two or more to pool investment funds) *

Angel investor An angel investor (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an individual who provides capital for a business or businesses start-up, usually in exchange for convertible debt or owners ...

s (individuals and groups) *

Sweat equity Sweat equity is a non-monetary benefit that a company's stakeholders give in labor and time, rather than a monetary contribution, that benefit the company. Sweat equity is rewarded in the form of sweat equity shares. These are shares given out by a ...

investor

Institutional investor

* Pension plans making investments on behalf of employees *

Business Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for pr ...

es that make investments, either directly or via a captive fund * Endowment funds used by universities, churches, etc. *

Mutual fund A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV i ...

hedge fund A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as sho ...

s, and other funds, ownership of which may or may not be

publicly traded A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange (list ...

(these funds typically pool money raised from their owner-subscribers to invest in securities) *

Sovereign wealth fund A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such ...

s * Large money managers Investors might also be classified according to their styles. In this respect, an important distinctive

investor psychology Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals or institutions, such as how those decisions vary from those implied by classical economic theory. ...

trait is

risk attitude In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more c ...

Investor protection

The term "investor protection" defines the entity of efforts and activities to observe, safeguard and enforce the rights and claims of a person in his role as an investor. This includes advice and legal action. The assumption of a need of protection is based on the experience that financial investors are usually structurally inferior to providers of financial services and products due to lack of professional knowledge, information or experience. Countries with stronger investor protections tend to grow faster than those with poor investor protections. Investor protection includes accurate financial reporting by public companies so the investors can make an informed decision. Investor protection also includes fairness of the market which means all participants in the market have access to the same information.

Through government

Investor protection through government involve regulations and enforcement by government agencies to ensure that market is fair and fraudulent activities are eliminated. An example of a government agency that provides protection to investors is the

U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...

(SEC), which works to protect reasonable investors in the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...

Investment tax structures

Company dividends are paid from after-tax profits, with the tax already deducted. Therefore, shareholders are given some respite with a preferential tax rate of 15% on "qualified dividends" in the event of the company being domiciled in the United States. Alternatively, in another country having a double-taxation treaty with the US, accepted by the IRS;. Non-qualified dividends paid by other foreign companies or entities; for example, those receiving income derived from interest on bonds held by a mutual fund, are taxed at the regular and generally higher rate of income tax. When applied to 2013, this is on a sliding scale up to 39.6%, with an additional 3.8% surtax for high-income taxpayers ($200,000 for singles, $250,000 for married couples).

Role of the financier

A financier () is a person whose primary occupation is either facilitating or directly providing investments to up-and-coming or established

companies A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared go ...

and

businesses Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services). It is also "any activity or enterprise entered into for profit." Having a business name does not separat ...

, typically involving large sums of money and usually involving

private equity In the field of finance, the term private equity (PE) refers to investment funds, usually limited partnerships (LP), which buy and restructure financially weak companies that produce goods and provide services. A private-equity fund is both a ty ...

and

venture capital Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which ha ...

mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...

leveraged buyout A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money (leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loan ...

corporate finance Corporate finance is the area of finance that deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the Value investing, value of the firm to the shareholders, and the tools and anal ...

investment banking Investment banking pertains to certain activities of a financial services company or a corporate division that consist in advisory-based financial transactions on behalf of individuals, corporations, and governments. Traditionally associated wit ...

, or large-scale

asset management Asset management is a systematic approach to the governance and realization of value from the things that a group or entity is responsible for, over their whole life cycles. It may apply both to tangible assets (physical objects such as buildings ...

. A financier makes money through this process when his or her investment is paid back with interest,Xavier Freixas, Jean-Charles Rochet, ''Microeconomics of Banking'' (2008), p. 227. from part of the company's

awarded to them as specified by the business deal, or a financier can generate income through commission, performance, and management fees. A financier can also promote the success of a financed business by allowing the business to take advantage of the financier's reputation. The more experienced and capable the financier is, the more the financier will be able to contribute to the success of the financed entity, and the greater reward the financier will reap. The term, financier, is French, and derives from ''

finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

'' or ''payment''. Financier is someone who handles money. Certain financier avenues require degrees and licenses including

venture capitalist Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which hav ...

managers,

trust fund A trust is a legal relationship in which the holder of a right gives it to another person or entity who must keep and use it solely for another's benefit. In the Anglo-American common law, the party who entrusts the right is known as the "settl ...

managers,

accountant An accountant is a practitioner of accounting or accountancy. Accountants who have demonstrated competency through their professional associations' certification exams are certified to use titles such as Chartered Accountant, Chartered Certifi ...

stockbroker A stockbroker is a regulated broker, broker-dealer, or registered investment adviser (in the United States) who may provide financial advisory and investment management services and execute transactions such as the purchase or sale of stocks an ...

financial advisors A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory ...

, or even public

treasurer A treasurer is the person responsible for running the treasury of an organization. The significant core functions of a corporate treasurer include cash and liquidity management, risk management, and corporate finance. Government The treasury o ...

s. Personal investing on the other hand, has no requirements and is open to all by means of the

stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...

or by word of mouth requests for money. A financier "will be a specialized financial intermediary in the sense that it has experience in liquidating the type of firm it is lending to".

Perceptions

Economist

Edmund Phelps Edmund Strother Phelps (born July 26, 1933) is an American economist and the recipient of the 2006 Nobel Memorial Prize in Economic Sciences. Early in his career, he became known for his research at Yale's Cowles Foundation in the first half of ...

has argued that the financier plays a role in directing capital to investments that governments and social organizations are constrained from playing: The concept of the financier has been distinguished from that of a mere capitalist based on the asserted higher level of judgment required of the financier.Sterling Elliott, ed., ''Good Roads: Devoted to the Construction and Maintenance of Roads'' (1896), Vol. 24, p. 366. However, financiers have also been mocked for their perceived tendency to generate wealth at the expense of others, and without engaging in tangible labor. For example, humorist

George Helgesen Fitch George Helgesen Fitch (June 5, 1877 – August 9, 1915) was an American author, humorist, and journalist perhaps best known for his stories about fictional Siwash College. Biography Fitch was born in Galva, Illinois. He was the eldest son of ...

described the financier as "a man who can make two dollars grow for himself where one grew for some one else before".

References

External links

* {{Authority control Finance occupations Financial services occupations Investment funds Investors