Making a comparison between individual and institutional investors is like comparing apples and oranges. They are different from the individual investors in their way of defining risks and their behavior as a result of economic changes and investment market. It does not mean that they are less famous than the institutional investors; merely their style of making investment offers distinctive challenges. Following are the features on the basis of which a comparison between individual and institutional investors is made:

Defining a Risk:

The main difference between individual and institutional investors depends upon the manner in which they are defining the risks. Institutional investors describe risks in quantitative terms, while the individual investors only see the risk on the basis of the amount of money being lost by them. An investor usually ignores those risks which have placed those profits in the portfolio.

Investment Prospect:

It is the length of time during which an investor normally makes a plan to make investment or it can also be called as the complete life cycle of an investment. The investment life cycle is inexact when we consider it from the institutional point of view. It is the most misapprehended idea from an individual point of view. It is generally regarded as the time period during which a person works with a company till his date of retirement, but actually it is more than that.

Lack of Recognition:

Individuals do not have to choose those business enterprises out of their comfort zones about which they do not have any knowledge and familiarity. Because of this lack of awareness, investors do not consider adding those asset classes in their portfolio, which assist in the enhancement of returns and the reduction of risk. An institutional investor has an advantage of huge means of information and high level of complexity, which makes it less probable to keep away from unseen areas.

Greed and Fear:

It is not a right thing to say that greed and fear are inevitable. When we are considering the human behavior to investment, it is normal to have a feeling about the bull market or bear market. Investors may also have a chance to act opposite, but it is very hard to invest in those asset classes the value of which is going down.

They may also choose those portfolios the value of which is increasing. Some investors avert from following decent investment opportunities due to unpleasant long tem term memories. For example you may often heard people saying that they will not make investment in a particular portfolio just because they have formerly lost money or someone they know have lost money in that portfolio.

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