Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Mom and Pop

What it is:

A "mom and pop" business is a colloquial reference to a small, independently owned and operated business with few employees and relatively low sales volume.
 
"Mom and pop" investors are typically unsophisticated investors who are not involved in investment activities on a professional basis.

How it works (Example):

"Mom and pop" businesses are typically family operations with few, if any employees who are not family members. As a result, "mom and pop" denotes a family-like atmosphere and a small, intimate work environment.

"Mom and pop" investors are individual investors who buy and sell stocks usually through a broker. This approach can be quite successful; however, mom and pop investors are not engaged in investment research and analysis on a daily basis. As a result, "mom and pop" investors usually lag in their returns on investment, and since they typically do not move quickly, they are the hardest hit when the market falls dramatically.

Why it Matters:

"Mom and pop" operations have traditionally been an important source of small business growth. Building a business within a family, raising capital from within the family and reinvesting capital in business infrastructure create opportunities for solid growth, limited risk exposure, and a loyal, dedicated workforce.
 
Indeed, "mom and pop" businesses have begun to change. In fields such as freelance writing, graphics, real estate paperwork, scheduling, and even target marketing, "mom and pop" business are increasingly capturing a share of international business outsourcing, with low overhead, low cost technologies and "no cost" communication infrastructure.