The term ” stock market” has different meanings. However, the term is often used as a general word for denoting the primary and secondary markets. In fact, the term “primary market” and “secondary market” are not the same as they are different terms with a critical difference. The primary market is referred to the market where company securities are created, and the secondary market refers to the market where they are traded regularly by investors.
Kavan Choksi Singapore– the difference in the primary and the secondary markets
Business and finance expert Kavan Choksi Singapore has extensive knowledge of the primary and secondary markets. He is a business and wealth management specialist with interest in fine arts as well. According to him, every trader must be aware of the primary and secondary markets to trade successfully. Knowing how these markets work is the key to understanding how company stocks, government or company bonds, and other asset-class securities trade in the markets. Without the primary and secondary markets, these securities would be challenging to navigate and could be less profitable for the traders dealing with them.
Understand how the primary and the secondary markets function
The primary market refers to the marketplace where the company securities are created. This market is the place where new stocks and bonds are issued for the first time to the general public. An example of a primary market is an initial public offering, often called IPO short. The trades here give investors a chance to purchase securities from banks that conducted the initial underwriting for a specific stock. The IPO takes place when the company, for the first time, releases its stores to the public in the market for sale.
Understanding the secondary markets
For purchasing equities, the secondary market is called the stock market, and it includes NASDAQ and the New York Stock Exchange, abbreviated as the NYSE in the USA. It also consists of the other critical global exchanges that are used for trading. The distinctive trait of this marketplace is that the investors here trade among themselves.
How does the secondary market differ from the primary market?
The above can be explained with an easy example. The secondary market is that marketplace where there is no involvement by the company. If you want to buy stock from Amazon, you are not dealing with the company directly. You are trading with another investor that holds stocks from Amazon and wants to sell them in the marketplace. The transaction is carried out between both of you, and Amazon as a company comes in nowhere in the picture.
Kavan Choksi Singapore states that the stock market is not recommended for unprepared traders. There are risks, and it is prudent for one always to consult the expertise of a financial advisor for smart investing in these markets. Understanding what the primary and secondary markets mean in your nation is the first step for any trader to earn lucrative profits in the financial markets successfully.