In institutional investments capital is put in the stock market by banks, financial bodies etc, in short this is done by individual bodies that are formed with the support of many people. The amount of capital invested here is huge, the shares are bought in bulk for long-term and even sold the same way unlike retail investment wherein people investment small amount of money and make short or long-term investment.
What are the Prerequisites of Institutional Investment?
Excellent financial planning: Before going for this, the company needs to have a financial plan in place. Financial planning will give a proper dimension to the investment planning as it lets the companies know how much they can investment and how much risk they can afford. As the amount of investment is very high even the risks are high. If done in a systematic and carefully researched manner institutional investments gain good returns on their investments and in case the damage can be hard to pay back.
Sound Market knowledge: Every company that has made a fortune in it, has a strong base in the form of sound market knowledge. There are market research experts who keep their eyes on the stock markets 24/7. They assist investors in taking crucial decisions like when, where and how to invest capital, the time duration and the possible risks that can be encountered in the worst case scenario. Stock market research is like the backbone of institutional investment.
A growing number of financial establishments are turning towards it, main reason being the high profit margins. As these companies purchase large number of shares at a single point of time they are eligible for discounts on the brokerage charges too. The individuals who invest their money in small amounts in companies who do institutional investments are also at benefit, as they too are rewarded with high dividends. There are many such benefits of investing in a firm that carries out institutional investment but the fact that there is certain amount of risk involved in the stock market cannot be ignored. The companies that are actively undertaking institutional investments are many and thus individuals should do a background check and then decide where they want to put their capital.
Main stream market investment is and has always been a high risk high returns business with institutional investments coming in the picture the probability of high returns is always present. The companies have become the risk takers.
People with little capital may not be eligible for this, but does not keep them away from enjoying the benefits. They can invest money in companies that do such investments and ultimately get good returns.