Retail vs. Institutional Investors: What’s the Difference?

August 10, 2025

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Scroll through the financial news section on any given day, and you’ll likely come across mentions of retail investors and institutional investors. If you’re still somewhat new to investing, you may be wondering what’s the difference.

Generally speaking:

Retail investors are individuals who invest their own money for personal financial goals (e.g., retirement). These are your everyday investors (non-professionals) who manage their own money rather than invest on behalf of other people.
Institutional investors are typically companies or organizations that invest money for other individuals, organizations, or companies. They are considered professional investors and typically include investment banks, pension funds, and mutual funds. Because institutional investors often buy and sell securities in large quantities, they have significant influence on the markets.

Let’s take a closer look.

What is a retail investor?

They are your everyday individual investors who typically invest in things like stocks, bonds, and ETFs through an investment advisory or brokerage firm.

Retail investors put up their own money toward personal goals like retirement, wealth building, kids’ college fund, etc. If you have an IRA, 401(k), or individual investment account, you’re likely a retail investor.

Retail investors often buy and sell securities in smaller amounts (and trade less frequently) than institutional investors.

What is an institutional investor?

Institutional investors are entities that pool and invest large sums of money for others. Put another way, they’re professional investors responsible for making investment decisions for their members and clients. Common types of institutional investors include:

Investment banks
Pension funds
Endowment funds
Mutual funds
Hedge funds
Insurance companies

The money they manage usually comes from retail investors like yourself. For instance, if you have a pension plan or invest in a mutual fund, an institutional investor is probably helping you invest your money.

Because of their investment know-how and access to large sums of money, institutional investors typically trade in large volumes and can have a significant influence on the direction of the markets.

They may also have access to certain alternative investments such as private equity or hedge funds. These types of investments usually have high minimum investment requirements (we’re talking about millions of dollars), which means they’re often only available to institutional investors or individuals with a high net worth.

Key differences: retail vs. institutional investors

Here are three key ways that retail and institutional investors differ.

Investment decision-making and access to resources

As a retail investor, you decide where and how to invest your money. However, not all retail investors have the necessary experience or knowledge to make certain investment decisions on their own. That’s why many enlist the help of a financial and investment advisor when it comes to managing their money or executing trades.

Institutional investors, on the other hand, have teams of experts that work together to identify strategies and opportunities to invest the money they manage. Because institutional investors are professionals, they usually have access to sophisticated investment research, data, and analysis that may not be readily available to the average investor.

Trading habits and influence on the market

Retail investors buy and sell in smaller quantities and tend to trade less frequently than institutional investors. While retail investors may trade a few shares at a time, institutional investors could trade up to 10,000 or more shares in their transactions.

Because they typically trade in bulk, institutional investors can negotiate the fees on their investments—something that many retail investors can’t do—and often face lower trading or transaction costs.

Their large trades also mean institutional investors have a greater influence on how markets move. Much of the activities you see in the stock market are driven by institutional investors.

SEC protection

Since institutional investors are considered professional and experienced investors, they are typically able to make more informed investment decisions compared to your everyday retail investors.

This is one reason why the Securities and Exchange Commission (SEC) tends to have more resources, rules, and regulations in place to protect the average investor from fraud, misconduct, and high-risk investments.

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