The advantages of investing in the primary market are primarily reaped by promoters, who are able to start new ventures and expand their current ones. For the investors plonking money in an IPO is really an act of faith. You first hope that you will get an allotment of shares and then you hope that the share debuts at a decent price. Sure one doesn’t have to pay any brokerage, transaction fee and stamp duty in the case of primary market investment. But on the whole there isn’t any spectacular advantage that accrues from that kind of investment- at least not from the retail investor’s point of view.
The secondary market on the other hand provides a slew of opportunities to the investor. For starters it is a convenient form of saving on the part of even small retail investors. Not only do they save, but also add to their wealth through capital appreciation and dividends received. This is a great hedge against inflation.
People who are very smug with their fixed deposit savings often overlook the fact that after tax deduction and inflation adjustment, one doesn’t end up getting much return on one’s investment. Besides, in the case of the secondary market, one can conveniently encash one’s investment on the bourses any time one needs the cash.
Unlike in the case of the primary market where you might be required to invest large sums of money to get an allotment of shares you can buy shares at your convenience in the secondary market. What’s more you can avail of expert advice from stockbrokers or registered research analysts like 10paisa.com and make all the right investment decisions.
Another advantage of investing in the secondary market is the fact that you can choose which share to buy, unlike in the case of an IPO, where you are pretty much restricted by what is on offer. That apart, the secondary market can be tapped into anytime during the trading hours of the stock exchanges on all working days both for buying and selling shares. In the case of the primary market, you can invest only when an IPO has been announced.
One of the most critically important advantages that the secondary market provides an investor is that unlike in the primary market, one has ample opportunity to analyse the past performance and future prospects of the company whose shares you are thinking of buying. 10paisa.com for example has spent years focusing on the small cap space and has considerable expertise and knowledge about investing in that segment.
Whether you are a seasoned investor or somebody who has just about started investing in shares, you would do well to research the secondary market segment well or consult with someone who has. You will find that it affords you a very good opportunity to create a reasonable amount of wealth over the medium to long term provided that you make judicious trading decisions.
The fact that more and more people from all walks of life are seriously looking at investment in the secondary market is quite evident by the sheer number of business channels that proffer advice on TV. You too can look at investing in the secondary market, but like with all kinds of investment, you should weigh all the pros and cons before doing so.