Retail investors typically buy and sell stocks in round lots of shares or more; institutional investors are known to buy and sell in block trades of 10, shares or more. Because of the larger trade volumes and sizes, institutional investors sometimes avoid buying stocks of smaller companies for two reasons. First, the act of buying or selling large blocks of a small, thinly traded stock can create sudden supply and demand imbalances that move share prices higher and lower.
In addition, institutional investors typically avoid acquiring a high percentage of company ownership because performing such an act may violate securities laws. Institutional investors are the big fish on Wall Street and can move markets with their large block trades. The group is generally considered more sophisticated than the retail crowd and often subject to less regulatory oversight.
Institutional investors are usually not investing their own money, but making investment decisions on behalf of clients, shareholders , or customers. Investing Essentials. Career Advice. Portfolio Management. Money Market Account. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.
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We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Investing Investing Essentials. Institutional vs. Retail Investors: An Overview All types of investors are not the same, and there are a number of differences between those who are considered institutional investors and those who are seen as non-institutional, or retail , investors.
Key Takeaways An institutional investor is a person or organization that trades securities in large enough quantities that it qualifies for preferential treatment and lower fees. A retail investor is an individual or non-professional investor who buys and sells securities through brokerage firms or savings accounts like k s. Institutional investors do not use their own money, but rather invest other people's money on their behalf. Retail investors are investing for themselves, often in brokerage or retirement accounts.
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