Types of Shareholders / Investors

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Peter Burrows

Types of Shareholders / Investors

In what way(s) can we group shareholders? What are the differences between these various types of investors? Thanks for your inputs...

  Jaap de Jonge
Editor, Netherlands
 

Shareholder Types / Categories

Hi Peter, there are quite a few ways in which we can categorize shareholders; here are some investor types to get started:

1. Individual (private) shareholders versus institutional (corporate) investors. Private shareholders buy shares with their personal savings and typically they hold just a small number of shares. Institutional shareholders, such as pension funds, banks, investment funds, insurance companies, hedge funds, typically have a large number of shares. As a result, in corporate governance institutional investors are more powerful.

2. Long term versus short-term investors. For a company aiming to generate long-term shareholder value, it's quite important not to have too many shareholders who are looking for a fast buck.

3. A similar shareholder / investor classification is by their investment philosophy or attitude, such as savers (slow but steady growth, diversified portfolio, low-risk, long-term), speculators (looking for special / rare opportunities, high-risk, short-term) and specialists (rely on sector know-how, preparation, planning and experience, focused (specialized) portfolio, medium-risk, medium-term). You can find many variations on these 3.

4. Ordinary (common) stock holders versus preferred stock holders. Preferred stock holders typically have a special privilege for future profits of the company. And/or they might have special rights when new shares are issued. Here is more on preferred stock.

Who can add another typology of shareholders? Thanks...

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