12 May 2016 By PDSNET

A person, either natural or juristic, that purchases and holds any investment in a security. On the JSE, most of the investors are institutions (pension funds, unit trusts and insurance companies) who account for about 90% of all trades. The other 10% of investors are private investors. For this reason, the institutional investors completely dominate the JSE. They are different from private investors in the following ways:

  1. They invest far larger amounts of money - which means that they can only deal in shares which have sufficient volume traded to accommodate the size of their transactions. Generally, these are the large well-established blue chip shares. They have become known as the "institutional stocks" and there are about 200 of them. Private investors can make their selections from about double that number of shares - which gives them a distinct advantage.
  2. The size of the average institutional transaction means that it tends to move the price of the share. Institutions have to be aware that, if they are selling, their sale will tend to push the price down and vice versa. Private investors will only impact a share's price in a very thinly-traded counter.
  3. Institutional transaction decisions are usually made by a committee of "fund managers" who are primarily motivated by the effect of the decision on their career. Private investors are motivated purely by their gains over the long-term.

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