Discover the Circle of Investors for Yourself

• Contagion is the spreading of a disease from one person or organism to another.
• Contagion is a risk in any market, and is especially dangerous in foreign exchange markets.
• Contagion is like a disease that travels from investor to investor like a virus, infecting other investors and causing an economic collapse.

A circle is a closed shape, and the same can be said about the circle around investors. Investors, whether they are individuals or institutions, are linked together in a circle. If one moves up, the others will too. If one falls, the others will too.

The Circle of Investors

Every market is made up of buyers and sellers. Sometimes, the sellers may control the market, but other times, it’s the buyers who are in control.
If you watch the stock market, you’ll quickly notice that large institutions or institutional investors tend to buy and sell stocks in larger quantities. This means that when institutions enter and exit a position, it can move the market.
It’s important to understand who the buyers or sellers are in order to position yourself accordingly. The bigger the buyer, the bigger the impact.

Macro-Investor

Macro-Investor, founded by Ron Rowland, covers current macroeconomic trends, and how these affect financial markets and investments.
The newsletter, which Rowland founded in 2015, focuses on how businesses and investors can respond to economic risks, such as inflation, deflation, and recessions.
Rowland earned his bachelor’s degree in economics from Harvard University and his MBA from Harvard Business School.

Macro-Investors

Macro-investors, as the name would suggest, are investors focused on the big picture. They generally subscribe to the view that macro-economic trends will drive asset prices, and that large and liquid investment vehicles are best able to take advantage of those trends. For example, an investor who subscribes to this view might view the U.S. dollar as a global currency, and invest in assets denominated in the currency.
Fundamental
Fundamental investors look at a company’s financial statements and attempt to value it based on these fundamentals.

Technical
Technical investors focus on the market’s past prices, and use charts and other tools to determine the future direction of the market.

Value
Value investors look at a company’s current stock price, and attempt to value it based on fundamental factors such as the company’s earnings, cash flow, assets, and liabilities.

Mutual Funds

Mutual funds are typically pool investments where investors pool their money to buy different securities. Mutual funds, often managed by stock brokers, invest in stocks, bonds, and money market instruments. Any investor can buy shares in mutual funds, and these funds can be bought and sold later on.
Mutual funds have performed well in the past few years, partly owing to their diversification and low fees. Mutual funds have the advantage of being flexible and allowing investors to get exposure to a wide range of securities. However, mutual funds also have disadvantages. Mutual funds have high minimum investments, and trading fees can be high as well.

Individual Investors

Individual investors, also referred to as retail investors, are investors that buy stock directly from a company. Stock trading is generally regulated by the Securities and Exchange Commission (SEC) to ensure fair trading. Individual investors make up the majority of all investors in the United States and own roughly 85% of the S&P 500 companies.
Most individual investors buy and hold stocks for years. Sometimes they’ll even hold onto a stock for decades.
Institutional Investors
Institutional investors, also referred to as professional investors or professional money managers, are investors who own and manage stock portfolios on behalf of other individuals and institutions. Institutional investors include mutual funds, pension funds, hedge funds, foundations, and endowments.
Institutional investors buy and hold stocks for years, too, and won’t sell a stock unless it makes economic sense to do so.

Portfolio Managers

Investors who focus on managing assets for others.

Hedge Funds
Investments that seek to generate abnormal risk-adjusted returns, using a variety of strategies.

Real Estate Investors
Investors buy properties to rent or sell as investments.

Private Foundations
Trusts set up to manage assets for charitable purposes.

Pension Funds
Investments that insure against the risk of retirement that individuals face.

Family Offices
Investments that manage a family’s wealth.

Investment Advisors

Investment advisors, or financial planners, provide financial planning and investment advisory services for a fee. As wealth advisors, they can help you create a financial plan, including investing, and also help you adhere to that plan.
Investment advisors are regulated by the Financial Industry Regulatory Authority (FINRA), which maintains a website that allows users to verify and view the activities of registered investment advisors.

Brokers
Brokers buy and sell securities on behalf of clients for a fee. They don’t have to provide any advice, but, if they do, they are regulated by the Securities and Exchange Commission (SEC).

Investment bankers
Investment bankers work with companies, such as public corporations, in raising capital. Investment bankers are regulated by the SEC, as well.

Mutual funds
Mutual funds invest investor money in stocks, bonds, money market instruments, and other securities, and are generally managed by a mutual fund company. Mutual funds pool money from many investors and invest in securities according to the investment objectives stated in their prospectuses. Mutual funds regulated by the SEC are listed under their names, including MFS, Dreyfus, and Vanguard.

Exchange-traded funds (ETFs)
ETFs are funds traded on stock exchanges, where the price fluctuates and can be redeemed on a real-time basis. ETFs are similar to mutual funds in their use of passive management, but differ in that ETFs are traded like stocks. ETFs and mutual funds are regulated by the SEC.

Hedge funds
Hedge funds are private funds that invest in a variety of strategies, including short-selling, arbitrage, and market-neutral. Hedge funds, also called alternative investment funds (AIFs), are regulated by the SEC and are governed by the Investment Advisers Act of 1940.
These various types of investors can all be found on FINRA’s website.

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The Bottom Line

The “investor’s market” is alive and well, and savvy investors are finding new ways to cash in. These investors are adept at finding bargains at low prices and maximizing their returns.
Some are buying and holding, while others aim for short-term gains. Some are young, and others are older. Some are chasing the hottest stock or sector, while others are following what they believe to be solid fundamentals.
They are all relying on smarts, hard work, and a strong stomach.