The Stock Market Players

There are millions of investors in the world and many different types of investors so it’s important to know who the competition is you are facing before you jump in with the sharks.

In the stock market you are either doing the hunting or being hunted.

It’s a zero sum game meaning one person’s gain is another person’s loss so professionals are looking to take advantage of amateurs who don’t know how to value stock companies or estimate prices.

This tutorial will help you learn who the professionals are and give you a better understanding of how they all come together to make up the stock market.

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The 2 Core Analysis Methods Used by Investors:

It’s important to first understand the two types of investors out there in regards to the analysis method used.

Fundamental Investors – These investors judge a stock based on the company’s business. They look at their revenue and profits/losses for valuation purposes. If a company’s revenues and profits are growing then their shares become more valuable. Company valuation is covered in my stock valuation course here but since a company reports earnings every quarter (once every 3 months) then fundamental investors are usually in a stock for the long haul and not looking to day trade.

Technical Investors – These investors judge a stock based on price action and chart patterns. Usually these are investors looking for short term trades and day trades. If a stock is having a hot week making new all-time highs, a day trader might jump in and ride the stock higher for a short period before selling and taking profits. Companies who used fundamentals to buy into a stock may use technical analysis and graphs to decide entry and exit points for the stock.

The Stock Market Industry Players:

Now you’re going to find a list of the players that wake up each day ready to get to work in this industry.

These are your sophisticated and experienced professionals, who can leave you feeling like an amateur after they take your money if you don’t know what you’re doing.

Some professionals on this list will work for you because it’s what they do for a living or you may wish to self manage your own investments.

If you’re on the winning side often as a self manager, then you’ll start to realize you are either really lucky or maybe you are good at trading stocks and it was the right decision to save the fees of hiring an investment adviser/financial manager.

Let’s look at who makes up the industry:

Corporate Management – the cheerleaders for their own company and want people to invest in their stock. You have to be skeptical and analyze any news that a company releases to the public for the reasoning behind it and make sure they’re not trying to hype their company stock without substantial reasoning. You might buy into the hype and then later find out the CEO was dumping shares and the stock starts tanking. Always do your research of company management and any news released.

Brokers – Execute the trades for us. Everyone uses them in some way by sending them trade orders that need filled whether it’s a buy order or sell order.

  • Online Brokers – Robinhood, Scottrade, E-Trade, TD AmeriTrade, etc
  • Full Service Brokers – Financial Adviser Companies like Edward Jones, Northwestern Mutual, Financial Advisers at Banks, etc
  • Floor Brokers – execute trades on the exchange floor. Irrelevant to us.

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Analysts – Research and analyze certain stocks to predict future expected earnings and revenues. They issue analyst reports for their companies they work for like banks, hedge funds, mutual funds etc, to help management in deciding to purchase a stock or not.

SEC (Securities Exchange Commission) – The boss of the stock market world regulating unfair practices, insider trading, and many other rules that can have effects on companies.

Online Investor – someone who wants to trade from home and sets up an online brokerage account with anywhere from a few hundred dollars to many thousands of dollars. This is the self managed investor who trusts himself or herself over an experienced financial adviser

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Financial Advisers – People who are managing peoples’ money for them and investing into stocks and other assets for that person’s retirement

Hedge Funds – Mega funds that are available to the high net worth individuals and oversee millions and billions of dollars.

Mutual Funds – Clients money that is pooled together into this large fund and managed by a mutual fund manager. Usually invested in higher priced stocks since they are managing millions and billions of dollars. If mutual funds don’t perform well managers are still paid fees usually unlike hedge funds who have performance watermarks to achieve before getting paid. Watch out for mutual fund fees killing your wealth building momentum.

Pension Funds – The largest funds with billions and trillions under management that invest in order to grow the pension fund and afford to pay everyone’s pensions

These big guys that have millions of dollars to invest typically make up a large portion of the demand in the stock market because they have to buy so many shares with that large amount of money.

When they unload and sell shares into the market they can really tank a stock as well because there won’t be a large enough demand to combat the huge supply.

For this reason, most funds have to strategically break up their money into chunks and purchase a stock over time such as several days or weeks.

If you’re fortunate to get into a stock that a lot of institutional funds want into before they start buying then you should be in good shape as their demand for the stock should push the price up theoretically.

The average investor is late to the party usually though due to the fact that firms have many analysts doing research for them.

Other Players:

  • TV Promoters – guys on TV who announce stock tickers that millions of viewers see and then may or may not go purchase depending how gullible they are.
  • Financial Authors – publish trade theories and market analyses that investors might read and be persuaded to test out. The Intelligent Investor is a famous book by Ben Graham that Warren Buffet gives a lot of credit to.

Evil Players:

  • Penny Stock Promoters
  • Spam Mailers trying to hype a stock so they can dump shares
  • Unethical Brokers – brokers who want to make lots of trades for you to rack up lots of commissions from you. (Wolf of Wall Street)

Overall, Wall Street is full of greed and has con artists from time to time but trading stocks will be a necessary action to building wealth as the stock market has historically produced the best returns of any investment.

Whether or not you want to navigate the waters of buying stocks on your own without professional help is up to you.

I created an extensive course that goes in depth on how to invest in the stock market for beginners…which helps you learn the basics of the stock market and analysis as well as setting up your own brokerage account if you want to check it out here.

You’ll save management fees but you’ll still have broker fees for executing trades for you.

It’s important to do your research if you are going to hire a professional to manage your money to avoid not only the unethical greedy adviser but mainly excessive fees that kill your wealth momentum snowball from taking off.

Compounding interest is powerful but not as powerful when unnecessary fees are continually subtracted from it making it difficult to compound.

I hope this helped you learn a little more about the other players in the stock market industry. Stocks are a great investment and we all have different risk levels we are willing to take.

The old adage is that if you can sleep comfortably at night without worrying about your investments, then you’ve selected either the right risk level of investments that will make you nice returns over the years or have selected a really secure portfolio that will grow slowly but safely.

Visit Next: Stock Market 101 for Beginners

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