SHARETIPSINFO >> Articles Directory >> What is primary and secondary stock?
If you wish to invest in stocks, then it is always important that you study the market very well. Unless you know the present market scenario, you would not be able to make good money out of it. It is better if you consult a broker about the market. Now what is primary and secondary stock? So, let us discuss about these two types of stocks.
Primary stock is generally addressed as new issue market. Many companies which are normally small and medium scale, enters into this stock in order to raise money from the public in order to expand their business. Securities are sold to the public through an initial public offer. So, do you have any idea where the securities are bought from? Well, the securities are directly bought from the shareholders. The capitals for the primary market are traded over a long period. In this stock market, the investment banks play a very important role.
The money is collected from the issuing firms and it is then used for financing its operations or in order to expand businesses. If one wishes to sell the security, then the firm has to fulfill all the requirements related to exchange. There are people who go for day trading as well. The primary stock market helps to accelerate the process of formation of the capital in a country’s economy. There are many companies that enter into the primary stock market in order to earn profit by converting its capital. The capital is basically a private capital which gets converted into public one. It means that they release securities for the public. This proecess is also known as “public issue” or “going public.”
Secondary stock market deals with those types of securities that are already offered to the public in the primary stock market. People invest in Indian stock market with the hope of earning more profits. It means that the secondary stock markets issues securities which are purchased or sold.
The main characteristic of secondary stock market is that it is highly liquid in nature. In today’s world, investors find very easy trading with secondary stock market. So, you have come to know what is primary and secondary stock. So, go for stocks and shares but with proper research of the market.
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