What is an investor?

An Investor is an individual, company, or any entity that invests capital to make a profit. The investor’s main concern is to maximize return while minimizing risk.

Speculators, who hope to make a higher-than-average profit, have a greater risk tolerance than investors.

There are several types of investments, including real estate, commodities, currency, derivatives, bonds, stocks, etc. Even time (which costs money) is a form of investment.

Revenue Land has the following definition of investor:

“A person, company, or other entity that commits funds with the expectation of a return on investment, i.e., that they will get back more than they put in.”

Several images of people investing money plus definition of investor
Image created by Market Business News.

Investors have various possible functions

Investors may provide loans, buy shares, guarantee to pay creditors, or even contribute with labor.

Investors may operate both in the primary (injecting capital into a business) and secondary markets (buying stocks from other investors). In other words, they may either make a commitment in exchange for a stake in a business, a fixed return (dividends or interest), or sell their investment later on for a higher price.

When two companies commit to a joint venture and contribute funds to it, they are both investors.

Many people get together and form investment clubs, which pool their resources and knowledge together in order to get more successful investment outcomes.

Etymonline.com says that the English word ‘investor’ emerged in the 1580s with the meaning ‘one who clothes’. In 1862 the meaning had become ‘one who invests money’.

The word ‘investor’ in Spanish is ‘inversor’, Portuguese – investidor, French – investisseur, Italian – investitore, German – Investor, Russian – инвестор, Japanese – 投資家, and Chinese – 投资者.

Two main types of investors

There is the retail investor and institutional investor.

  • Retail Investors

People who invest for their own personal account rather than for a company or organization. This category also includes collectors of things of value such as antiques, stamps, coins and art.

Angel investors, those who invest in start-up companies with their own money, are retail investors.

  • Institutional Investors

These are entities which pool money to invest including companies, institutions, and **private equity funds, which operate as investment collectives on behalf of high net-worth individuals.

** Private equity refers to investments made in private companies, i.e. those not listed on stock exchanges.

Those managing pensions plans, insurance reserves, investment trusts, mutual funds, hedge funds, and other funds are also institutional investors, as are businesses that invest either directly or through a captive fund.

An investor commits resources to a project or business, expecting to gain a future benefit.

Compound phrases with ‘investor’

A compound phrase is a term that consists of two or more words, such as ‘angel investor.’ In business English, there are many compound phrases containing the word ‘investor.’ Let’s have a look at some of them:

  • Passive Investor

Invests in funds or portfolios without active management.

For example: “She’s a passive investor in index funds.”

  • Accredited Investor

High net worth individual with access to complex investments.

For example: “He’s an accredited investor in private deals.”

  • Value Investor

Looks for undervalued stocks with strong fundamentals.

For example: “Warren Buffet is a famous value investor.”

  • Impact Investor

Invests for financial return and social/environmental impact.

For example: “She’s an impact investor in green tech.”

  • Sophisticated Investor

Experienced with significant knowledge and financial resources.

For example: “He’s a sophisticated investor in venture capital.”

Invests against market trends, buying when others sell.

For example: “He’s a contrarian investor during downturns.”

  • Growth Investor

Focuses on companies with above-average growth potential.

For example: “She’s a growth investor in tech startups.”

From the root word ‘invest’

The root word of ‘investor’ is ‘invest.’ Here’s a list of some derivatives of ‘invest’:

  • Nouns

Investment – The action or process of investing money for profit.

Investor – A person or organization that invests.

Investiture – The action of formally investing a person with honors or rank.

Investability – The suitability of something to be invested in.

Investment-grade – A quality of securities considered relatively low-risk by rating agencies.

Investorship – The state or condition of being an investor.

  • Verbs

Invest – To allocate money in the expectation of some benefit in the future.

Reinvest – To invest money again or differently.

Disinvest – To withdraw investments or reduce investment.

  • Adjectives

Investable – Suitable for investment.

Invested – (Used metaphorically) Endowed with a quality or attribute.

Investment-grade – Suitable for investment by financial institutions.

Investor-owned – Owned by investors, typically referring to a company.

Investor quotes

  • Steve Forbes, Editor-in-chief of business magazine Forbes, said:

“One thing on psychology, which we’ve always known, is that every investor says they’re long-term – and they are until the market takes a hit.”

  • American multibillionaire Warren Buffett, said:

“The investor of today does not profit from yesterday’s growth.”

  • Multibillionaire Bill Gates, co-founder of Microsoft Corporation, said:

“I’m an investor in a number of biotech companies, partly because of my incredible enthusiasm for the great innovations they will bring.”

  • Jamie Dimon, Chairman, President/CEO of JPMorgan Chase, said:

“The United States has the best, deepest, widest, and most transparent capital markets in the world which give you, the investor, the ability to buy and sell large amounts at very cheap prices. That is a good thing.”

Two Videos

These two interesting video presentations, from our sister YouTube channel – Marketing Business Network, explain what ‘Investor’ and ‘Investment’ are using simple, straightforward, and easy-to-understand language and examples.

  • What is an Investor?

  • What is an Investment?