Share Market: Types of Market (Basic Part 2)
We have seen how the Stock Market work and other basics of Market in Part 1. In part 2, we're going to see the types of Stock Market and more detail about the Initial Public Offer (IPO) and some basic terms of Share Market.
There are Two Types of Market
1) Primary Market and
2) Secondary Market.
1) Primary Market
Primary Market is the Market where Stock(units) is an issue for the first time in the market through Initial Public Offer (IPO)
The issued will either through Public or Private Placement.
Private Placement means where issuer issues to a small group of people. Investors are mainly a large bank, mutual funds, insurance company, and Pension funds.
Public Placement means where issuer issues to general people. Anyone can buy this stock. Public and Private Placement will be cover in more detail afterward.
When less than 200 stock allocate than it is known as Private Placement and when more than 200 stocks allocate than it is known as Public Placement
The Price of the Stock can be base on a Fixed price or Book building issues.
When the Price of Share is an issue by the issuer and mentioned in the offer document, then it is known as Fixed Price. Building Price means the price of a share is decide on the base of demand from the investor's side.
2) Secondary Market
In the secondary Market, People buy and sell those shares which there already own. The Shares bought from the primary market can be sold in the secondary market.
The price in the secondary market is base on forces of supply and demand.
Secondary market deals through Over the Counter (OTC) and exchange-traded.
Over the counter (OTC) is a dealer oriented market of securities, where the exchange takes place through phone, email, etc. It is an unorganized market and operates 24x7. Mainly Small companies operate through OTC.
Exchange Trade Market refers to a formally established stock exchange wherein securities are traded. It is under the supervision and ensure that all rules and regulations are follow while trading is performers through Exchange.
Some basics term of Share Market
You know that you earn money by investing in Share Market. The following are the ways your money grows.
When a company earns a profit, it distributes to a Shareholder in the form of Dividends. It distributes according to Shares you own. The more share you own more dividends you will get and vice versa.
2) Capital Growth
Captial growth leads when you invest in equities/ share. The longer is the investment more capital you will get. Investment in stock is also associated with risk.
Buyback means companies buy the share from the investor in high value than the market value. Companies buy back shares because it has a huge cash pile or to consolidate its ownership.
If the above information is helpful to you, then press the Heart-Icon on your right-hand side and subscribe to our newsletter and never miss any update. See you in the next part