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Individual foreign investors are different from institutional investor companies

For most common people, investment takes a more passive route. These investments generally comprise a significantly smaller section of the whole market. Hence, they do not have the ability to vastly affect the demand and supply trends within the market. Individual investment only forms a very small part of the various kinds of investors in the market, be it stock market or real estate. On the contrary, institutional investments result in noteworthy market movements.

How we understand the various kinds of investors in the market varies on a range of factors. It can be understood on the basis of country, size of the investment, people involved, and many more. Of the various categories in existence, individual foreign investors and institutional investor companies make up a significant portion.

Understanding Foreign Investments

In foreign investment, capital flows from a particular country to the other. This way the foreign investors gain access and ownership over the stake of domestic companies. With foreign investment, one of the most important parts is that foreigners play a significant role. Their investments or equity stake is large enough to create a significant effect on the strategies that the business may employ. With a wider focus on globalisation, there is a significant trend for multinational companies to make investments in various countries all around the globe.

Who are individual investors?

Individual investors, as the name suggests, are common people who invest in the stock market or other such markets at an individual level. As this happens at a more personal level, individual investors generally do not have the kind of capital that would be needed to create a difference in the market. Investment in these situations is more to meet personal goals or acquire personal growth.

For individual investors, making any kind of deal in the market warrants a mediator. The dealer or the broker helps in conducting every operation that is required when making an investment. Now, since the extent of operation remains relatively small, individual investors cannot have an effect on the momentum of the market, in general.

Keeping this in mind, foreign individual investors are investors operating personally, but in a foreign market. While they still hold smaller shares and do not generally have a huge effect on the market, they have assets in companies outside their country as well.

What is meant by institutional investor companies?

In contrast to individual investors, institutional investors comprise a big group of investors or companies who focus primarily on making investments. These investments can be made on various channels like shares, real estate, derivatives, or stocks. They basically operate by creating a pool of investments that have been made by relatively smaller investors.

As such an investment generally is a high-value affair, transactions conducted in this regard are generally huge, consisting of a lump sum amount of money. This basically means that they have a huge impact on the prices and can influence the market environment. The values can go up or down, depending on the type of investment made.

For this reason, whenever a huge market movement is noted, it is generally attributed to the doings of these investor companies. In comparison to individual investors, these institutional investors have an advantage as they can perform operations on a much wider scale and have much more funds to allocate towards this sector.

As it can be seen, there remains a significant difference between individual and institutional investors. While institutional investments can take the form of mutual funds, conducted through banking agencies, or be in the shape of insurance companies, individual investment is more inclined towards personal growth and accumulation of wealth in the long run.

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