Ask the Fool

Q. Who are “institutional” investors?

--J.D., Flint, Mich.

A. Institutional investors are the big guys. They include mutual funds, pension funds, banks and insurance companies. You might think that the market is mainly made up of individual investors like you, but in reality, since institutional investors trade in such large volumes, they can account for more than two-thirds of daily market activity. Whether a stock is in or out of their favor can have a big effect on its price. You can benefit, though, if you discover a small gem and invest in it early. When institutions eventually start buying, they’ll drive its price up.