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An investor is a person that allocates capital with the expectation of a future financial return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Types of investments 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 differe ...

equity
,
debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...
,
securities A security is a tradable financial asset A financial asset is a non-physical asset In financial accounting Financial accounting is the field of accounting Accounting or Accountancy is the measurement, processing, and communication o ...
,
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 genera ...

real estate
,
infrastructure Infrastructure is the set of fundamental facilities and systems that support the sustainable functionality of households and firms. Serving a country, city, or other area, including the services and facilities necessary for its economy An eco ...

infrastructure
,
currency A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" in the most specific sense is money Money is any item or verifiable record that is generally accepted as payment for goods and services ...

currency
,
commodity In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of plan ...
,
token Token may refer to: Arts, entertainment, and media * Token, a game piece or counter, used in some games * The Tokens The Tokens were an American male doo-wop-style vocal group and record production company group from Brooklyn, New York B ...

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), ''Futures'' (magazine), an American finance magazine. Music *Fu ...
, 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 a 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 law, trust or partnership) that is registered by the corporation as the ...
.


Essential quality

The assumption of risk in anticipation of gain but recognizing a higher than average possibility of loss. The term "speculation" implies that a business or investment risk can be analyzed and measured, and its distinction from the term "investment" is one of degree of risk. It differs from
gambling Gambling (also known as betting) is the wagering something of Value (economics), value ("the stakes") on an Event (probability theory), event with an uncertain outcome with the intent of winning something else of value. Gambling thus requires ...
, which is based on random outcomes. Investors can include stock traders but with this distinguishing characteristic: investors are owners of a company which entails responsibilities.


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 Security (finance), securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, S ...
s:


Retail investor

* Individual investors (including
trusts A trust is a legal relationship in which the holder of a right (eg. title to a chattel) gives it to another person or entity who must keep and use it solely for another's benefit. In English common law English law is the common law legal sy ...
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 start-up, usually in exchange for convertible debt In finance Fina ...
s (individuals and groups) *
Sweat equitySweat 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 c ...
investor


Institutional investor

* Pension plans making investments on behalf of employees *
Business Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services). Simply put, it is "any activity or enterprise entered into for profit." Having a business name A trad ...

Business
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 An investment fund is a way of investment, investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group such as reducing the ri ...
s,
hedge fund A hedge fund is a pooled investment fund Image:Financial info.jpg, The values and performance of collective funds are listed in newspapers. An investment fund is a way of investment, investing money alongside other investors in order to benefit ...
s, and other funds, ownership of which may or may not be
publicly traded A public company, publicly traded company, publicly held company, publicly listed company, or public limited company A public limited company (legally abbreviated to PLC or plc) is a type of public company under United Kingdom company law, som ...
(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, Bond (finance), bonds, real estate, precious metals, or in alternative inve ...
s * Large money managers Investors might also be classified according to their
styles Style is a manner of doing or presenting things and may refer to: * Architectural style, the features that make a building or structure historically identifiable * Design, the process of creating something * Fashion, a prevailing mode of clothing s ...
. In this respect, an important distinctive investor psychology trait is
risk attitude In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...

risk attitude
.


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 a large independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929 The Wall Street Crash of 1929, also known as the Great Crash ...
(SEC), which works to protect reasonable investors in America.


As individuals

Investor protection through individual is the strategy that one utilizes to minimize loss. Individual investors can protect themselves by purchasing only shares of businesses that they understand, or only those that remain calm through market volatility. An individual investor may be protected by the strategy he uses in investment. The strategy includes an appropriate price of the stocks or assets in the right time he enters. It's hard to fix what "an appropriate price" is, and when it is appropriate because no one makes a purchase or a sale absolutely in his most favorable situation. However, determination may be made when the price of such share or assets are "undervalued" comparing to its potentiality. This is called the margin of safety where an investor can feel at ease when the price of the stocks is alarmingly down.


Investment tax structures

While a tax structure may change, it is generally accepted that long-term capital gains will maintain their position of providing an advantage to investors. This is countered by the opinion that after-tax returns should be considered, especially during retirement, on the basis that allocation to equities is in general, lower, than any returns and should be maximized, to the most lucrative extent. In the current circumstances, long-term capital gains offer one of the best opportunities 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 Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
tax structure. It is made easier for investors to generate long-term capital gains by the employment of
exchange-traded fund An exchange-traded fund (ETF) is a type of investment fund and exchange-traded product, i.e. they are traded on stock exchanges. ETFs are similar in many ways to mutual funds, except that ETFs are bought and sold from other owners throughout the da ...
s (ETFs), the process of investment in broad-based index funds, without required indicators. Although some outlandish ETFs could provide investors with the opportunity to venture into previously inaccessible markets and employ different strategies, the unpredictable nature of these holdings frequently result in short-term transactions, surprising tax equations and general performance results issues. 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).


Discipline

A disciplined and structured investment plan prevents emotional investing which can be related to impulsive buying. This factor can be utilized to counteract the sentiments of a marketplace, which is often reflective of the emotional state of an entire population. Short-term activity in stock prices or the broader markets can frequently be compared to impulsive actions. This is seen in the term "bull run" which can induce investors to leap into an investment, as opposed to a "bearish market" that could influence a "sell-off". It is these types of market scenarios that can cause investors to abandon their investment strategies. Investor discipline is the ability to maintain an investment strategy even in the most tempting, or extreme conditions in the marketplace. An established and popular method for stock market investors is
Systematic Investment Plan A systematic investment plan (SIP) is an investment vehicle offered by many mutual fund A mutual fund is an open-end professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds are "the largest ...
s (SIPs) especially for those who have a regular, monthly surplus income. The provision for reaping maximum benefits from these plans is that a disciplined strategy is maintained, one of the foremost advantages for a successful investor. Consistency is closely associated with an investment strategy and can be related to various, adopted, proven techniques; for example, predicting outperforming funds, valuation, or a technical strategy. A strategic advantage that meets the required consistency is long-term investment, which in turn, offers investors long-term capital gains tax advantages. While many investors try to exercise a long-term disciplined approach, the investment marketplace can provide various, tempting options; for instance, a sudden drop in the marketplace, or a pending worldwide event. This is particularly prevalent for retired investors, who are preserving their capital with care.


Constant advantage for retirees

In general, core indexes remain constant making it unnecessary for investors to move from one to another. Although an investor could transfer holdings; despite a maturation of the companies and their markets; a large-cap exchange-traded fund would never require being switched for a similar holding. A large-cap ETF will always remain so and an investor will usually want to retain at least a part allocation to large-cap equities in their portfolio. It is consistency that is a significant advantage for ETF investors and one that makes it convenient to retain investment positions and benefit from long-term capital gains tax. Despite a potential reduction in the capital gains tax advantage, it is an advantage that should continue to provide some positive benefits in producing after-tax returns. This is a factor that could become an important issue in the future as taxes increase, affecting the lifestyles of retirees. It can be added to by additional taxes generated in short-term trading, exacerbating the situation, due to normal income-tax rates increases.


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 In law Law is a system A system is a group of Interaction, interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surround ...

companies
and
businesses Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services). Simply put, it is "any activity or enterprise entered into for profit." Having a business name A trad ...
, typically involving large sums of money and usually involving
private equity Private equity (PE) typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded. Private equity is a type of equity and one of the asset classes consisti ...
and
venture capital Venture capital (VC) is a form of private equity Private equity (PE) typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded. Private equity is a ty ...
,
mergers and acquisitions In , mergers and acquisitions (M&A) are transactions in which the ownership of , other business organizations, or their operating units are transferred or with other entities. As an aspect of , M&A can allow enterprises to grow or , and change ...
,
leveraged buyout A leveraged buyout (LBO) is one company's acquisition of another company using a significant amount of borrowed money (Leverage (finance), leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as coll ...
s,
corporate finance Corporate finance is the area of finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers a ...
,
investment banking An investment bank is a financial services Financial services are the economic services provided by the finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is conce ...
, or large-scale
asset management Asset management refers to 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 asset In financial accountancy, f ...
. 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
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 differe ...
awarded to them as specified by the business deal, or a financier can generate income through
commission Commission or commissioning may refer to: Business and contracting * Commission (remuneration), a form of payment to an agent for services rendered ** Commission (art), the purchase or the creation of a piece of art most often on behalf of another ...
, 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 , and derives from ''
finance Finance is a term for the management, creation, and study of money In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left corn ...

finance
'' or ''payment''. Financier is someone who handles money. Certain financier avenues require degrees and licenses including
venture capitalist Venture capital (VC) is a form of private equity Private equity (PE) typically refers to investment funds, generally organized as limited partnerships, that buy and restructure companies that are not publicly traded. Private equity is a ty ...
s,
hedge fund A hedge fund is a pooled investment fund Image:Financial info.jpg, The values and performance of collective funds are listed in newspapers. An investment fund is a way of investment, investing money alongside other investors in order to benefit ...
managers, trust fund managers,
accountant An accountant is a practitioner of accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporati ...

accountant
s,
stockbroker A stockbroker is a regulated broker A broker is a person or firm who arranges transactions between a Purchasing, buyer and a sales, seller for a commission (remuneration), commission when the deal is executed. A broker who also acts as a seller ...

stockbroker
s,
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 bo ...
, or even . 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 stock In finance, stock (also capital stock) consists of all of the shares In financial markets A financial market is a market in whic ...

stock market
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 An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from e ...
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. 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 described the financier as "a man who can make two dollars grow for himself where one grew for some one else before".George Fitch, ''Vest Pocket Essays'' (1916), p. 123.


Guidelines of specific investors

Specific investment practices are suggested to maintain an ethical behavior based on principles universally accepted.


Socially responsible investing

Socially responsible investing Sustainable Energy: One of many forms of sustainable investing Socially responsible investing (SRI), social investment, sustainable socially conscious, "green" or ethical investing, is any investment To invest is to allocate money Image ...
any
investment Investment is the dedication 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 Finance is the study of financial institution ...

investment
strategy Strategy (from Greek#REDIRECT Greek Greek may refer to: Greece Anything of, from, or related to Greece Greece ( el, Ελλάδα, , ), officially the Hellenic Republic, is a country located in Southeast Europe. Its population is approxim ...

strategy
which seeks to consider both
financial returnReturn on capital (ROC), or return on invested capital (ROIC), is a ratio used in finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and m ...
and positive impacts on people and the planet. It is recommended in all types of investment by supporters of socially responsible investing.


See also

*
Business magnate A business magnate is someone who has achieved great success and enormous wealth through the ownership of multiple lines of enterprise. The term characteristically refers to a wealthy entrepreneur or investor who controls, through personal ente ...
*
Businessperson A business person (business man, business woman) is a person involved in the business sector In economics, the business sector or corporate sector - sometimes popularly called simply "business" - is "the part of the economy made up by company, c ...
*
Compound interest Compound interest is the addition of interest Interest, in finance and economics, is payment from a debtor, borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, ...

Compound interest
*
Corporate finance Corporate finance is the area of finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers a ...
*
Crowd funding Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, in modern times typically via the Internet The Internet (Capitalization of Internet, or internet) is the glob ...
*
Financial literacy Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. Raising interest in personal finance is now a focus of state-run progr ...

Financial literacy
*
Growth capital Growth may refer to:"''Quantative increase in size''". Biology * Auxology, the study of all aspects of human physical growth * Bacterial growth * Cell growth Cell growth refers to an ''increase in the total mass Mass is both a property ...
*
Investment Investment is the dedication 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 Finance is the study of financial institution ...

Investment
*
Investor profile An investor profile or style defines an individual's preferences in investment To invest is to allocate money Image:National-Debt-Gillray.jpeg, In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contr ...
* Model audit *
Philanthropy Philanthropy consists of "private initiatives, for the public good, focusing on quality of life Quality of life (QOL) is defined by the World Health Organization The World Health Organization (WHO) is a list of specialized agencies of th ...

Philanthropy
*
Real estate investorA real estate entrepreneur or a real estate investor to a lesser extent is someone who actively or passively investment, invests in real estate. An active investor may buy a real property, property, make repairs and/or improvements to the property, ...
*
Saving account A savings account is a bank account at a retail banking, retail bank. Common features include a limited number of withdrawals, a lack of cheque and linked debit card facilities, limited transfer options, and the inability to be overdrawn. Traditi ...
*
Securities market participants (United States) Securities market participants in the United States include corporations and governments issuing securities, persons and corporations buying and selling a security (finance), security, the broker-dealers and exchanges which facilitate such trading, ...
*
Securities offering A securities offering (or funding round or investment round) is a discrete round of investment Investment is the dedication of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asse ...
*
Stock investor in Dutch). Stock trading in Dutch). Stock trading activity, as we know it today, was originally a 17th-century Dutch investing technique. File:NY stock exchange traders floor LC-U9-10548-6.jpg, Historical photo of stock traders and stockbroker ...
*
Time value of money The time value of money is the widely accepted conjecture that there is greater benefit to receiving a sum of money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, ...
*
Usury Usury () is the practice of making unethical or immoral monetary loan In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and ...
*
Venture capitalist Venture capital (VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have dem ...


Further reading

*
Matthew JosephsonMatthew Josephson (February 15, 1899 – March 13, 1978) was an American journalist and author of works on nineteenth-century French literature and American political and business history of the late 19th and early 20th centuries. Josephson populariz ...
, ''The Money Lords; the great finance capitalists, 1925–1950'', New York, Weybright and Talley, 1972. * Graham, Benjamin; Zweig, Jason (2003) 949 ''The Intelligent Investor''. Harper Collins.


References


External links

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