Investor definition
/What is an Investor?
An investor is an entity that commits money to a venture with an expectation of generating a return. The type of commitment made can be in many forms, such as a guarantee to pay creditors, a loan, an equity investment, tangible assets, or even the contribution of labor. An investor typically makes a commitment in exchange for either a fixed return (such as dividends or interest) or the prospect of being able to sell its investment to a third party at a later date for a higher price than the amount of the original investment.
An investor can be an individual or a corporate entity. For example, a corporation could contribute funds to a joint venture, in which case the corporation is an investor in the joint venture.
Related AccountingTools Courses
Public Company Accounting and Finance
Passive Investors vs. Active Investors
A passive investor purchases the securities offered within a market index, with the intent of profiting from broad swings in the returns generated by all entities contained within that index. They are not concerned with stock-picking, being more interested in a hands-off approach that involves making an investment and then holding it for a long period of time.
Active investors research specific securities and their issuers in order to discern any cases in which value has not been fully realized by the market, and from which they might profit. This involves a detailed analysis of an issuer’s financial statements, as well as an industry analysis for the industry in which the issuer is located.