Institutional investors are organizations that manage large pools of money – including mutual funds, pension funds, banks, insurance companies or hedge funds – and unlike retail investors, they are the ones which have the financial muscles and positions often large enough to dictate the direction of the markets. As William O’Neil, founder of Investor’s Business Daily and author of best-seller “How to Make Money in Stocks” wrote in his book, “It takes big demand to push up prices, and by far the biggest source of demand for stocks is institutional investors. These large investors account for the lion’s share of each day’s market activity.” Hence, savvy investors regularly look at the funds flow of institutional investors, or often referred to as the “smart money”, for an indication of how the market is likely to move. Likewise, it is probably not such a good idea to stand in their ways should institutions are looking to sell.
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