Now that you understand primary markets, let's explore where those securities go next - secondary markets!
Secondary markets are where investors trade securities with each other, not with the company. Think of it like a used car lot, but for stocks and bonds.
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How is this different from primary markets?
Here's the key difference: In primary markets, you buy new shares directly from the company. In secondary markets, you buy existing shares from another investor.
The company doesn't get any money from secondary market trades - it's just investors trading among themselves.
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Who gets the money when you buy Apple stock today?
The New York Stock Exchange (NYSE) and NASDAQ are famous examples of secondary markets. When you hear about stock prices changing throughout the day, that's secondary market activity.
Millions of investors are constantly buying and selling existing shares.
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What happens to stock prices when more people want to buy than sell?
Secondary markets provide something crucial called liquidity. Liquidity means you can quickly convert your investment back into cash by finding someone willing to buy.
Without secondary markets, your stock investment would be stuck until the company bought it back!
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Why would liquidity make you more willing to invest in the first place?
Here's why secondary markets help primary markets: Investors are more willing to buy new IPO shares because they know they can sell them later on secondary markets.
It's like buying a car knowing there's a used car market if you need to sell.
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Would you buy an IPO if you could never sell the shares?
