Different Types of Investor Explained

man in suit holding an investor sign

For the novice investor, stepping into the financial markets can be baffling and overwhelming. There’s a whole new language to learn, a vast array of products to understand and a whole raft of firms and consultants vying to offer advice.

To enter the financial world, one thing that investors need to define is what type of investor they are for investment companies in London. This matters because some schemes are only open to those with experience and/or a large amount of capital to invest. Introduction agents, such as Amyma, can help investors define what kind of investor they are.

There are three main categories of investor – some investors will be clearly in one category, others may sit in two.

High Net-Worth Individual

These investors either have high earning power or considerable assets or both. It covers those who earn upwards of £100,000 a year or have £250,000 or more in assets. It isn’t possible to include equity in the home as part of the assets’ calculation.

Self-Certificated Sophisticated Investor

These are investors with some experience under their belt. The main defining factor here is whether they have invested in two or more unlisted stocks or bonds in the past 12 months. So, while they may or may not have capital, they do at least have some knowledge of the markets.

Restricted Investor

This category covers those who don’t fall into either of the other two categories. So, that’s those without sizeable assets, capital or current experience. This restricts them to investing a total of 10% of their net worth. Again, equity in the home isn’t included as part of this calculation.

Next steps

The way investment companies in London find out this information is through a self-certification document. This is a simple declaration of the investor’s experience and assets, as listed above. Self-certification only needs to be completed once a year.

Once investment companies in London receive this documentation, they can send out their promotional information to investors for them to decide on whether to fund the scheme.

An important note: self-certification gives investors responsibility for their investment decisions and if there is any issue, they may not be able to seek compensation from the Financial Services Compensation Scheme.