Retail investor definition
A retail investor is an individual and non-professional investor who buys and sells securities or funds through brokers or other investment accounts. Retail investors purchase securities for their personal accounts and invest smaller amounts than institutional investors.
Retail investment has been growing significantly because of access to financial information and trading tools, and in 2021 the retail investment market in the US made up 32% of total equity volume.
Retail investors vs Institutional investors
While retail investors tend to buy and sell securities for themselves, institutional investors act on behalf of others as pension funds, mutual funds, money managers, insurance, hedge funds and private equity firms.
Retail investors tend to invest smaller amounts and are not necessarily industry-savvy, whereas institutional investors are market specialists with in-depth knowledge of their areas, making them more significant players in the marketplace.