Active investors are professional investors who try to 'beat' the stock market's performance.

For retail investors, the stakes may seem higher and more personal. Critics say that this dynamic means that retail investors are more susceptible to behavioral biases that could lead them to make poor decisions when it comes to buying and selling assets. For instance, fear of missing out could cause a retail investor to buy a stock that is popular but not a financially worthy investment.

Institutional investors, on the other hand, are investing for someone else. There are big differences between the two, one being that institutional investors can be granted certain special treatment (like being able to purchase IPOs right away).

Retail investors often trade 100 shares at a time, while institutional investors trade 10,000 or more. The biggest difference is that, unlike retail investors, institutional investors are professionals who are trading someone else’s money.

Value investing specifically focuses on fundamentals like earnings, assets, and price-to-earnings ratios. In contrast, growth investing targets companies with rapid future potential, often trading at higher valuations. Both strategies offer unique paths to returns.

High fees tend to eat away at whatever edge professional managers accrue, resulting in most such funds performing worse than their underlying benchmark indexes like the S&P 500.

Famed investor Warren Buffett is known for building his empire with this strategy, which he learned from his mentor Benjamin Graham.

Private equity often attracts investors who can afford to tie up capital for long periods of time in exchange for higher returns than traditional investments. For many years, private equity at least tracked with the S&P 500 in terms of returns to investors, but in 2024 and 2025, it underperformed and posted declining returns.

Most investors buy stocks with the expectation that those stocks will be worth more tomorrow than they are today. Short selling, known as “shorting,” a stock is the opposite: The investor is betting the stock will drop in value.

Some critics of the S&P 500's selection process argue that human involvement makes it an actively managed index. S&P Global maintains that while a human selects the stocks in the index, those decisions are not made with the intent of maximizing performance, but rather, to provide a snapshot of the largest companies across different industries.

Mutual funds function similarly to other types of investments. If you want to invest, you go through a brokerage firm. However, they have a few key differentiators. Most are actively managed by a broker instead of passively earning you returns. Plus, they can carry some hefty fees.

While more people invest in stocks than bonds, experts say owning both can make for a healthier portfolio. Stocks are considered a riskier investment than bonds, but tend to have higher returns. While bonds might be the safer option, they won’t grow your wealth as quickly.

When average Americans began pouring into the stock market, Wall Street wasn’t sure if its new guests were there to stay. But at the end of 2023, Public confidently declared that retail investors “weren’t going anywhere” after 30 million new individuals began buying and selling stock. Download the report to learn more here.

These categories include real estate, private equity, private debt, hedge funds, collectibles, and more.

In the US, many retail investors lack the SEC-mandated status (a high enough net worth, income, and other factors) to directly invest in hedge funds. The regulator considers hedge funds too risky for the masses. Hedge fund-like strategies have emerged as a workaround, despite potential pitfalls.

Hedge funds often operate on a "2 and 20" model: Investors pay fund managers a 2% management fee, and the hedge fund keeps 20% of their profits. (The 2% is imposed annually, irrespective of performance.) Hedge funds are known for chasing big returns—and taking big risks to get them. This explainer not only breaks down how they work in detail, but also the strategy first introduced in 1949 that still shapes hedge fund investing today.

Private equity firms focus on buying and improving private companies with the intent to sell them for profit or take them public. Venture capital is technically a form of private equity in which investors focus on startups and generally don't seek majority control of the company. Hedge funds are pooled investments for sophisticated investors that pursue a wide range of often complex strategies.

A day trader is anyone who buys and sells a stock within the same trading day. They quickly move in and out of the market to try and profit. Some day traders are professionals, while others are retail investors.

The greatest investors have all made a fortune off of their success and, in many cases, have helped millions of others achieve similar returns. Read about the lives and approaches of Carl Icahn, Warren Buffett, George Soros, and more.

The individuals who invest this initial capital are called the firm's limited partners. Private equity firm LPs include sovereign wealth funds, university endowments, high-net-worth individuals, and more.

By holding large ownership positions, which often come with leveraged access to a company's board or the ability to force a shareholder vote, activist shareholders can change a company's corporate governance, leadership, and overall direction. Critics argue that activist shareholders hurt companies in the long term by prioritizing short-term higher shareholder returns over sustainability and growth efforts.

Online investing platform eToro conducted a survey of retail investors in June 2024. It explored what assets they held and what types of stocks they liked to purchase. The most commonly held asset was cash, with 76% of retail investors holding cash in their portfolios. The next most popular asset was domestic stocks, with 49% of investors.

Retail investors may not have the same resources institutional players do, but thanks to the internet, they can access several free tools that provide a leg up. These tools do everything from recommending portfolio allocations to helping investors screen stocks.

Barbell investment strategies emphasize bypassing medium-risk investments in favor of combinations of high-risk and low-risk investments. The idea is that the stability on the low-risk side offsets the volatility on the high-risk side, and would look like a barbell with two large weights on either end of the bar.

Because alternatives often have little correlation with traditional investments like stocks and bonds, adding them to a traditional portfolio can reduce its overall risk exposure.

An infographic that shows the most common types of investments used by financial advisors with their clients in 2023 also found that nine in 10 advisors used ETFs, and three-quarters invested in cash and cash equivalents.

Investors are likely familiar with “asset allocation,” creating an ideal mix of different asset types in an individual's portfolio. But asset location matters just as much for investors who are conscious of how much they owe in capital gains taxes.

Instead of purchasing individual stocks and bonds, new investors may want to start in funds that track an index—like the S&P 500—or that hold a group of themed stocks.

These different types of private equity include venture capital, growth equity, and buyouts.

Limiting PE to accredited investors helps protect less experienced investors from large and risky investments. Accredited investors must meet requirements set by the Securities and Exchange Commission—they're typically required to have a net worth exceeding $1M, for instance.

The financial assets typically fall outside the scope of traditional investments like stocks and bonds, and they’re often intended to diversify investor portfolios.

Investors often use alternative investments, from collectibles to real estate, as a way to diversify their portfolios in case of market volatility. Getting started investing in these alternatives differs depending on the investment.

Since the index represents a broad range of diverse industries, it's become a proxy for the market itself and a common benchmark for investors to compare returns and performance patterns against. Generally speaking, when someone says a stock is under- or out-performing the market, that actually means under- or out-performing the S&P 500. The S&P 500 is exchange-agnostic, and includes companies listed on both the NYSE and Nasdaq.

This PitchBook article explores how university endowments invest in capital markets to support their institutions. It explains how endowments are structured and managed to generate returns that fund scholarships, research, and operations. The piece also discusses the evolution of endowment investment strategies. This is a valuable read for understanding the financial mechanisms behind academic endowments.

As a hedge fund manager, Dalio's investment strategy relies on insulating investments from economic downturns. To do this, Dalio attempts to diversify investments as much as possible while considering the correlation between industries and markets.