Investor, Investors

November 23, 2010Investingby EconomyWatch


An investor is a person or entity who invests money in various asset classes for financial gain. Investors can be individuals or companies that purchase equity, debt securities, currency, real estate and commodity derivatives to generate income streams, capital appreciation or both.


Investor Types

Investors can be categorized as:

  • Individual investors: These can be anybody looking to invest in shares, bonds, foreign exchange or other securities. Trusts acting on behalf of individuals also come under this category.
  • Investment banks: These are financial institutions that assist companies in raising funds by issuing equity. These banks perform other financial services, such as trading in equities, foreign exchange, commodities and derivatives, on behalf of their clients. Apart from providing consultancy services to businesses, these banks facilitate corporate restructuring and mergers and acquisitions. Investment banks earn profits by issuing and selling stocks and bonds.
  • Businesses: These are organizations that make investments in companies requiring funds to either expand into new markets or for new product development. These businesses fund the capital requirements of such companies in exchange for a stake in the company or for a share of profits generated through these new ventures. The risk is shared equally by the investors and the company that receives the funds.
  • Funds: These may be hedge funds or mutual funds, in which investors pool in money to invest in securities, such as shares, bonds or commodities. The ownership of these funds may not be publicly tradable.
  • Venture capital funds: These funds collect money from high net worth individuals (HNWIs) or institutional investors to invest primarily in early-stage, high-potential companies. The pooled money, called venture capital, is invested in such growth companies in exchange for a stake in these firms. The aim of venture capital funds is to realize huge profits during the invested company’s IPO (initial public offering) or sale. However, investments in growth firms are inherently risky.
  • Angel investors: These are either individuals or a group of affluent investors who provide starting capital for a business in exchange for a part ownership or convertible debt. These investors sometimes also provide specific expertise to these new firms. The sole investment purpose of these investors is to generate high returns.

Other types of investors are those who collect valuable objects, such as antiques and works of art.


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