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Primary market and secondary market

Before a company is listed in the exchange, the transaction that occurs between the company and the investor is called primary market…whereas secondary market is the next stage of buying and selling which occurs after the initial transaction between the company and the investor. Here trading takes place between an investor and another investor and the stock brokers are the mediators in this process,.

Now you may not be a trader or an investor, but when you buy a share from a company, you become a shareholder of that company. Owning stock means owning a piece of a company…remember these funds can grow faster than cash in your savings account. As a co owner you are en titled to a share of the profits and assets of that company.

Equity piece of share. If the company gets profit what is the profit to an equity shareholder? From the company’s profit the shareholder gets bonus or dividend .When the company grows the price per share increases which eventually leads to a rise in your net worth. But if the company incurs a loss, their stock price also falls and your net worth will also go down.

IPO means initial public offer

Company may request for a loan in order to expand that company…now bank loans are given with the help of securities but only for certain limits. They do not give loans predicting the future. So this company solicits the public for investment to expand the company. Now like RBI is the head for banks, SEBI is in charge of stock markets. SEBI offers public issue based on the financial statement of that company

Based on the company’s credibility, awareness and liquidity… investors invest in that company. The shares of this company get listed in the exchange. After which you can start trading with the help of a broker’s platform.

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