Know the Investor in you

Have you ever wondered what is an investor? Are all the investors the same? How do they go about investing?
In this post, we are going to uncover all of these secrets. So stay tuned.

So now the question.

Who is an Investor?

According to the classic definition, an investor is an entity, it can be a person or institution or any group, that commits capital with the expectation of receiving financial returns.

Everyone is an investor in some way or another. Some invest time, some money, and some in their skills or brains all in expectation of a financial return. For example, someone who is working a job or doing a business invests his/her time in expectation of salary or profits, and someone who invests in equity, real estate, or metals expects returns in the form of appreciation, some invest in higher education or skillset to unlock returns in the form of higher earning potential.

We will take the people who use money as an investment capital and analyze it further.

Based on Risk Appetite

So if we classify investors based on their risk appetite they can be classified into two types:

Risk Takers: These people will take higher risks given that the returns are also high. These have a natural high-risk appetite. The chance of a large downside does not scare these people.

image credit – vecteezy.com

Risk Averse: These people will take risks but with a limited downside. If anyone is taking risks they want returns, but everyone can’t handle the thought of taking a risk which can erode their whole capital.

Based on Activity

Based on activity or participation investors can be classified into two types:

1. Active-Investors: These people are very active in whatever they invest in, meaning they analyze the investment in depth before making decisions on investing in the asset.
2. Passive investors: These people are not very active or occasionally active and rely on someone else to make investment decisions, which in most cases is their investment advisor.

Based on the capital amount

Capital is a big factor in investment. based on capital amount investors can be classified into 3 types:

1. Retail Investors: These are the people with small amounts of capital who participate in the public markets
2. Angel Investors: These are people with an amount which is way greater than a retail investor can invest. These investors can participate in public as well as private markets.
3. Institutional Investors: These are groups that pool money from people and invest it in public or private markets.

Based on the Time Frame

Based on the time frame investors can be classified into two types:

1. Short-term investors: Investors who invest for a shorter duration typically for a period of 3-5 years are known as short-term investors.
2. Long-Term Investors: Investors who invest for a longer duration typically more than for a period of 5 years are known as long-term investors.

This is all for this post. Don’t forget to follow my Facebook and Instagram pages for regular updates. See you all in the next post. Till then keep learning, keep growing.