Retail investor

Quick definition

Updated: Jan 24, 2022

A retail investor is any average person that invests with smaller purchasing power than large institutional investors.

Key details

  • A retail investor is an ordinary, everyday person who buys equities and securities at a much smaller scale and with a much smaller budget than large institutional investors.
  • Since retail investors make much smaller trades, they are often subjected to higher commissions and fees 
  • Retail investors make up a large segment of the market and have significant impact on market sentiment

What is a retail investor?

A retail investor is a non-professional investor that buys equities and securities at smaller quantities and for lower sums than their counterparts, institutional investors. Due to their lesser purchasing power, retail investors often have to pay higher commissions and fees when making trades. Though our selected brokers have eliminated fees for online trades, scroll through to register with one that suits your needs:

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Although criticised for their lack of knowledge and expertise in making investments, retail investors make up a huge segment of the market and heavily influence market sentiment. Market sentiment is the overall tone within financial markets, and often determines trading values. Therefore, despite their smaller trades, retail investors as a collective can largely determine price floors when making investments.

The majority of retail investors have retirement and brokerage accounts, and more households have increasingly owned stocks since the financial crisis of 2008. This is largely because the modern retail investor has more access to financial literacy and trading platforms than ever before. 

Retail investors vs institutional investors

Unlike retail investors, institutional investors are the big players in the market. These investors are often referred to as smart money because they are professional investors who make much larger trades at much greater scales and with a much bigger budget. Examples of institutional investors include:

  • Hedge funds
  • Investment banks
  • Mutual funds
  • Pension funds
  • Insurance companies
  • Private equity firms
  • Money managers
  • Commercial trusts

Where can I learn more?

For more information about retail investors and other key financial concepts, review our full course page. Our varied courses will guide you through everything you need to know about stocks and investing. 

Sources & references
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Srijani Chatterjee
Financial Writer
Srijani is the quintessential Third Culture Kid having grown up in India, Singapore, Malaysia, The Netherlands, Scotland, and England. She still loves to travel and speaks… read more.