In financial investment, the words finance, stock and broker go hand in hand as it is the way you combine them that will determine whether you are successful or you fail. As an investor, once you have the finance, it is important to identify the right stock to invest in. If you do not have sufficient knowledge on the capital markets then you need to identify a good broker to do this for you. Are we on the same page?
This brings us to our topic where we are seeking to simplify primary and secondary markets to enable you understand what they are and make more informed investment decisions to maximize your returns. By now you are familiar with the process of trading in stocks therefore this should be fairly easy to understand.
The primary capital market
When a company is seeking to raise capital to finance some of its operations without having to incur more debt, it floats its shares to the public through an Initial Public Offering (IPO). This is referred to as the primary capital market.It basically involves the company selling a certain percentage of its stake to the public through offering stocks or bonds.As a standard business practice, a company will seek the services of an investment banking firm to undertake this task. It is referred to as an IPO because the company is floating these shares publicly for the very first time.
The secondary capital market
The secondary capital market is what most investors refer to as the stock exchange. This is where selling, buying or trading in stocks among investors is done. By now you are familiar with the Nasdaq, the New York Stock Exchange and the London Stock Exchange, these are your classic secondary capital markets. This is where a broker gets to earn their buck as it is their knowledge of financial trends, market insight and very good instincts is what helps them make money for their clients.
Be sure to reach out to us and we will take you step by step through how the capital markets work and how you can make money.