A retail investor is a non-professional investor. Also known as individual investors, retail investors have an increasing impact on the market. This article aims to show you what are retail investors and how investors make money. Let's take a look.
What are retail investors?
A retail investor, also known as an individual investor, is a non-professional investor who buys and sells securities or funds that contain a basket of securities such as mutual funds and exchange traded funds (ETFs).
Retail investors execute their trades through traditional or online brokerage firms or other types of investment accounts. Retail investors purchase securities for their own personal accounts and often trade in dramatically smaller amounts as compared to institutional investors. An institutional investor is an umbrella term for larger-scale investments by professional portfolio and fund managers who might manage a mutual fund or pension fund.
How do investors make money?
Investors make money in two ways: appreciation and income. Appreciation occurs when an asset increases in value. An investor purchases an asset in the hopes that its value will grow and they can then sell it for more than they bought it for, earning a profit. Income is the regular payment of funds from the purchase of an asset. For example, a bond pays fixed payments at regular intervals.
Retail traders need to understand that there is no room for amateurs and realize the intricate relationship between exchanges, venture capitalists, market makers and whales. Whether or not a partnership is on paper, a mutual benefit ensures that these players have preferential access to pre-seed funding rounds, listings and market access.
The only way for investors to opt out of losing money is to give up on trading and avoid leverage trading like the plague. In reality, investors with six months or longer timeframe stand a chance of being profitable in each of their positions.
Hope this article can help you get a basic understanding of what are retail investors and how investors make money.
