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Basics of Stock Market 11: Types of High Worth Investors who buy in the stock market


Now, you should have got a good understanding of the different types of traders and investors in the stock market. Here, we will be focussing on investors alone. Investors who invest in IPO alone or after IPO in the secondary market as well. RII, QIB, NII are investors who focus mostly on IPO. There are a whole variety of people who invest in the stock market. Investors are people who hold onto their share for more than a day.

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Retail Individual Investors: RII

Retail individual investors or RIIs have less than 35 percent of the total shares offered to them during an IPO. These investors are not permitted to buy shares worth more than Rs 2,00,000. This is done to ensure other people have the opportunity to buy shares. Resident Indians and non-resident Indians can apply for this.

Investors purchasing their IPO shares under the RII category may buy shares at the cut-off price. This is the price decided by the company based on demand for the IPO.

Retail investors are someone like you and me. Retail Investors have small purchasing power, they often have to pay higher fees on their trades, as well as marketing, commission, and other related fees. SEBI considers retail investors unsophisticated investors, who are afforded certain protections and barred from making certain risky, complex investments.

CDSL has recently announced that it becomes the first depository to open four crores plus (40 million) active Demat accounts. Ordinary people participating in wealth creation through the stock market is good but unfortunately, most retail investors are indulging in reckless trading and losing money instead of systematically investing and creating wealth.

Market analysts believe the number of retail investors may continue to grow and their growth rate may even accelerate further as the market is towards clocking healthy gains in the long run after the economy picks pace.

Qualified Institutional Buyer: QIB

Public financial institutions, commercial banks, mutual funds, and Foreign Portfolio Investors can apply in the QIB category for IPO. SEBI registration is required for institutions to apply under this category. 50% of the Offer Size is reserved for QIB's.

QIBs are mostly representatives of small investors who invest through mutual funds, ULIP schemes of insurance companies, and pension schemes. They cannot bid at the cut-off price.

High Net worth Investors: HNWI

People who fall into this category generally have at least $1 million (10 crores) in liquid financial assets. HNWIs are in high demand by private wealth managers because it takes more work to maintain and preserve those assets. These individuals generally demand personalized services in investment management, estate planning, tax planning, and so on.

Almost 63% of the world's HNWI population lives in the United States, Japan, Germany, and China, according to the Capgemini World Wealth Report. HNWI are classified into three:

  • Millionaires, who have $1 million to $5 million in investable wealth