Who Are Individual Investors?
An individual investor, also known as a retail investor, is someone who buys stocks and other assets on their own, typically in smaller quantities. Unlike large institutions, these investors purchase stocks for their personal portfolios, not on behalf of any organization. They often buy stocks in amounts like 25, 50, 75, or 100 shares at a time.
Emotional Investing
Many individual investors make decisions based on emotions such as fear and greed. This can lead to suboptimal trading, as stock markets are highly unpredictable, making it difficult to foresee the movement of stock prices.
Types of Individual Investors
High-Net-Worth Individuals (HNIs)
Who They Are: Wealthy individuals with significant financial resources.
In India: HNIs have investable assets exceeding Rs. 5 crore.
Characteristics: Typically, HNIs hold high-ranking positions like CEO or chairperson and often own large businesses.
Investment Strategy: They require careful financial planning to maintain their lifestyle and preserve their wealth. Private banks and financial advisors play a crucial role in helping HNIs achieve their financial goals.
2. Ultra-High-Net-Worth Individuals (UHNWIs)
Who They Are: Extremely wealthy individuals with a net worth of at least $30 million.
Global Influence: This small group holds a significant portion of global wealth.
In India: The number of UHNWIs is growing, with 13,263 individuals in 2023, expected to reach nearly 20,000 by 2028, according to Knight Frank's 'The Wealth Report 2024'.
3. Retail Investors
Who They Are: Also known as individual investors or retail traders, these are non-professional investors.
Investment Method: They purchase stocks, bonds, mutual funds, and ETFs through intermediaries like brokerage firms, financial advisors, or investment managers.
Motivation: Retail investors aim to secure their financial future and build personal wealth. For some, investing becomes a full-time occupation.
Investment Behavior: Due to their smaller purchasing power compared to institutions, retail investors tend to invest in smaller amounts and trade less frequently.
Understanding these categories helps in recognizing the diverse nature of individual investors and their approaches to investing. Whether driven by personal goals, wealth management, or professional advice, each type of investor plays a unique role in the financial market.
Rathi
Marketing Intern
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