There are two main categories of investors: individual vs institutional.

Individual investors

Individual investors may have a diverse range of investment motives. Many are investing to prepare for retirement, in which case most individuals participate in defined contribution pension plans. An individual investor’s circumstances such as age, employment status, investment goals, etc. dictate their investment strategy and asset allocation

Institutional investors

Institutional investors include:

Defined benefit plans

Defined benefit plans: Company-sponsored plans that offer employees a pre-defined benefit at retirement. The plan sponsor funds the plan and retains any shortfall risk. Companies have been switching from defined benefit plans to defined contribution plans which carry lower risk and financial strain on sponsors.

Endowments and foundations

Endowments are non-profit vehicles that provide help to institutions (such as universities) in providing services. Foundations are bodies that provide grants for specific purposes. Due to their extremely long time horizon, they have large exposure to alternative investments. Since most foundations and endowments are intended to have perpetual existence, the formula their spending rule, such as to preserve their real capital value while paying sufficient funds for operations of the institutions.

Banks

Banks invest their excess reserves, but only in highly liquid and safe investments. They also manage funds on behalf of their retail investors.

Insurance companies

Insurance companies must invest the premiums that they earn in order to be able to pay the claims when they become due. They are broadly classified into life insurers and property and casualty insurers. Assets necessary to fund liabilities form part of the general account which is invested conservatively, but the surplus (represent net assets of the insurance company) may be invested aggressively. Many insurance companies have dedicated investment management teams, and some even offer portfolio management services to other investors.

Sovereign wealth funds

SWFs are government entities tasked with surplus earnings of a nation. They typically invest over the long-term in both financial and real assets.

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