(4) Best Stock Selection
It is one of the most popular reasons behind high public shareholding pattern in stocks. Retail investors or traders are always looking for best stock selection in stock markets.
If they are successful in finding best stocks then they confidently allocate their capital to them. They never hesitate to ignore the rest of the stocks that can provide minimum returns only.
On the other hand, a large institution with billions of dollars can’t invest exclusively in those market leaders. They are investing under the supervision of highly reputed management.
They have to spread their excess investments across hundreds of stocks. They often find it difficult to avoid diversification of portfolios in stock markets.
This investment strategy limits exposure of big investors or fund houses towards winning stocks up to certain extent. Sometimes, a winning stock can be too small or cheap for an institution to buy.
However, a retail investor need not concern about the size of a company & its share price. This is particularly true until his/her profits are being generated.
(5) Happy With Quarterly Earnings
It is one of the most common reasons for high retail participation in stocks. A small investor or trader answers only to himself or herself regarding stock investment.
If he or she is happy with the quarterly earnings, corporate announcements, future guidance, etc. then he or she can remain invested in stocks.
On the other hand, a large institution is a huge bureaucratic organization. It needs to be operated as per the rules & regulations of investments.
Some of the rules & regulations of stock investment by big institutions include stocks that meet specific parameters, posting audited quarterly & annual results, following federal regulations, as well as internal compliance rules.
Additionally, professional fund managers in big institutions tend to provide explanations regarding their positions & action to investors & superiors. However, small investors can freely invest in their favorite stocks with no external pressure.
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