Investor

An investor is a person or an entity that allocates financial capital. They do this with the expectation of a future return. This return is often called a profit. Investors may also seek to gain an advantage known as interest. To do this, they usually purchase various species of property. This process of allocating capital is how money moves through the economy.

There are many different types of investments available. Some investors choose equity, which means owning a piece of a company. Others choose debt, which involves lending money. Investors may also buy securities, real estate, or infrastructure. They might invest in currency, commodities, or even digital tokens. Some use complex tools called derivatives, such as put and call options. They might also use futures or forwards to manage their money.

Investors are generally divided into two main categories. The first group is retail investors, also called individual investors. These are single people making their own choices. The second group consists of institutional investors. These are large organizations that manage huge sums of money. Institutional investors include several distinct sub-types. Pension plans invest money on behalf of employees. Businesses may invest directly or through a captive fund. Endowment funds support institutions like universities or churches.

Other large groups manage money through specialized funds. Mutual funds and hedge funds are common examples. These funds pool money raised from many owner-subscribers. They then use that pooled money to invest in securities. Some of these funds are publicly traded. Others are not. There are also sovereign wealth funds, which are owned by nations. Additionally, large money managers act as institutional investors. Each group operates with different goals and scales.

Governments play a vital role in protecting these investors. They use regulations and enforcement to keep markets fair. These rules help to eliminate fraudulent activities. In the United States, the Securities and Exchange Commission, or SEC, provides this protection. They work to protect reasonable investors within the country. The United Kingdom has similar protections for its citizens. There, the Financial Services Compensation Scheme, or FSCS, helps individual investors. These agencies ensure that the financial system remains stable.

Tax structures also affect how much money an investor keeps. In the United States, company dividends are paid from net income. This income has already had taxes deducted. Because of this, shareholders may receive a preferential tax rate. For qualified dividends from U.S. companies, this rate is 15 percent. This is possible if a country has a double-taxation treaty with the U.S. However, non-qualified dividends are taxed differently. These are often taxed at higher regular income tax rates. In 2013, these rates reached up to 39.6 percent. High-income taxpayers might even pay an additional 3.8 percent surtax.

A financier is a professional who handles large sums of money. The term comes from the French word for payment. Their primary job is facilitating or providing investments to businesses. They work with both new and established companies. This often involves private equity or venture capital. They may also handle mergers, acquisitions, or leveraged buyouts. Financiers can earn money through interest or equity. They might also earn income through commissions and management fees.

Financiers often use their reputation to help businesses succeed. More experienced financiers can contribute more to a company's growth. Some professional roles require specific degrees and licenses. These include hedge fund managers, stockbrokers, and financial advisors. They may also be public treasurers or accountants. Personal investing is different because it has no such requirements. Anyone can participate through the stock market. Economist Edmund Phelps noted that financiers direct capital to specific investments. This helps fill roles that governments or social organizations cannot.