What is an investor?

An investor is an individual who puts money into a specific account, business venture or another opportunity with the aim of receiving financial gains. Investors often have a variety of professional backgrounds, and the two primary types are institutional and retail. Institutional investors or professional investors are financial professionals who handle investments for corporations or other large organizations. In contrast, retail investors or private investors are individuals who invest independently based on their own personal choices and the funds available to them.Investors study the economic environment of their preferred markets to make decisions on how to invest their funds wisely. Successful investors try to minimize financial risk and maximize profit by using strategic plans to buy, sell or invest their resources in various entities or in a single account or business.Instructional investors often manage hedge funds and other large accounts and may invest funds in foreign currency or oversee a mutual fund for a 401(k) account. Retail investors usually manage smaller amounts of money and own less diversified accounts. They typically invest in a smaller number of funds.

How to become a retail investor

Becoming an institutional investor often involves taking a series of small steps to secure your portfolio and achieve returns. If you hope to start investing your funds, consider the following six steps: 

1. Learn the basics of investing

Before you begin investing, it's helpful to research how the market works through books, blogs, financial podcasts, videos and even training courses. Listening to the advice of financial professionals and investing experts may help you gain a more thorough understanding of your options and allow you to determine the best investment strategy for you. 

2. Consider your investment strategy

Thinking about why you want to invest can help you allocate your funds accordingly to begin your investment. Identify whether you prefer to increase your income or save for retirement, in addition to your preferred level of risk. Certain investments may be riskier than others but have the potential to generate higher profits over a certain period of time. Developing an understanding of your long-term goals as an investor can help you in making more informed decisions. 

3. Develop a plan

After you research the financial market and consider your investment strategy, make a plan for how and where you want to invest. For any fund, it's important to consider the rate of return in relation to your investment, how long you want to keep your funds in the account and any financial fees for withdrawing or moving funds. Here are some of the primary investment options for retail investors:

• Mutual funds
• Stocks
• Cryptocurrencies
• Bonds
• Individual Retirement Funds (IRAs)
• Real Estate Investment Trusts (REIT)

4. Begin building your portfolio 

You can better manage risks by choosing a few small investments. Decide on a reasonable sum to start investing with based on what you were able to save. As your investing knowledge and confidence increase, you may want to consider more risks with your funds. Practice diversification so you can better adjust your risk tolerance and become more prepared for fluctuations in the market. Diversification involves distributing your funds evenly across a number of asset classes, so even if one performs poorly, it's not likely to affect your entire portfolio. 

5. Evaluate your portfolio regularly

Even if you plan to put money into a fund and not withdraw it for a long time, it's still a good idea to monitor the value of your investments. Some investors review stock values every day as they increase and decrease to determine whether to sell their shares. If you're investing for your retirement, it's useful to review your funds frequently, especially as you near retirement age. Depending on the brokerage platform, you may be able to access tools and training to help you plan for the unexpected.

6. Make strategic changes

After you secure your initial investments, choose carefully how to adjust your funds. Emotional decisions to divest money or liquidate a stock may result in fewer returns for your portfolio. Some investors consider reinvesting dividends to purchase more stock, which involves reallocating their investment with the aim of increasing its value. After a market fluctuation, it may be useful to review your funds and meet with a financial adviser. 

How to become an institutional investor

Since institutional investors handle large-scale investments for organizations, more specific training is often necessary. Institutional investors typically need a combination of financial training and education. If you want to become an institutional investor, here are six steps you can take:

1. Earn a degree

Earning a bachelor's or advanced degree in finance, business or economics provides the foundation for professional investing. Courses in financial strategy, economics and accounting can help you prepare for a career as an investor. Some financial professionals also pursue a Master of Business Administration (MBA) to gain more knowledge and distinguish themselves as qualified candidates who are prepared to manage funds for an institution.

2. Complete an internship

While you're in university or after completing your degree, it's beneficial to complete an internship working in a large bank, corporation or financial institution. Internships can help you learn more about investing and network with investment professionals. They're also useful for improving your investing skills and basic expertise. 

3. Focus on an area of investing

As you gain professional knowledge, consider the specific type of investor you want to become. Institutional investors often specialize in a particular financial area or type of fund. 

4. Gain work experience with a financial institution

Institutional investors usually begin working with a firm to learn from senior investors. They gain the skills required to make wise financial choices for corporate entities and work to maximize their returns. As an entry-level investor, you might manage accounts across numerous sectors of the economy. This can give you the experience necessary to oversee the financial interests of a variety of industries.

5. Network with other investment professionals

As you progress in your career, it's beneficial to network with other investment professionals to ensure that your knowledge is current. Consider participating in business conferences to learn more about investment opportunities and markets. You can also use your existing professional network to meet other investors and learn from them. 

6.  Participate in professional development 

In addition to networking, take advantage of any professional development opportunities that may be available to you. Use blogs, podcasts or video courses to increase your knowledge and understanding. Consider gaining certifications and licenses to help you progress in your career. For example, if you want to transition into a career as a stockbroker managing commodities, it's important that you obtain a Series 3 license.

Tips for becoming an investor 

Here are a few tips to help you become a more successful investor:

Develop your skills and financial knowledge 

It's important that professional investors understand how to evaluate market conditions and recognize opportunities for profit. They may be responsible for buying and selling stocks in a high-stakes environment, making quick decisions while calculating risk and return for a client's funds.Investors often need excellent mathematical, critical thinking and decision-making skills to do these things effectively. Enhance your skills by remaining updated on your knowledge of the market and how it functions. Review your investments regularly and consider all your options thoroughly before making a decision. 

Employ new investment strategies

Your original investment strategy is likely to change, depending on the conditions of the market and your long-term goals. Continue to leverage the resources available to you so you can make better decisions. Investing often requires patience and persistence, and it may take you some time before you're able to develop the right strategy for your needs.

Learn good investing habits

You may be able to become a more informed investor by continuing to learn from investment experts, diversifying the portfolio you're managing, creating a target asset allocation and rebalancing your portfolio regularly or however often you feel is most suitable.In addition, read the financial section of the news and review companies you might be interested in investing in to learn more about their long-term viability. Try to avoid investing in funds you don't know much about and instead focus on those that are well-researched.