Secondary market investors such as institutions, individual investors and mutual funds can gain from buying and selling of bonds and stocks in the secondary market. There are many investors who buy new issues of bonds and shares and Initial Public Offerings (IPO).
But these people are primary market investors. In the secondary market, investors buy already existent securities from other investors. The secondary share and bond market is quite healthy and there are flexible options for timing and pricing trades. Investors investing in stocks in the secondary market are either growth investors or value investors.
Growth investors are those that are investing in those companies that have a revenue growth rate faster than the industry growth rate. The investment style of value investors, on the other hand, involves the favoring of “good companies at great prices”.
The companies in whose stocks the growth investors invest do not pay much as dividends. The risk tolerance level of the investors determines the type of investors in the secondary market they would be.
The investors with high risk tolerance levels are usually more interested in investing in growth stocks while investors with low risk tolerance levels invest in value stocks.
The stock market investors are either buy-to-hold investors or they could be preferring the short term over the long term. The value investors tend to be more of the buy-to-hold type. Haste and imprudence should be avoided while investing in the secondary market. The stock market is a highly volatile place. Price can fluctuate drastically. Investors do always have the chance of losing their hard earned money in a jiffy. Therefore, investments should be done intelligently. The services of an efficient and experienced broker must be availed of.
Bond market investors are also a type of secondary market investors when they trade in the secondary market. A thorough study of the secondary bond market must be done before investing. Investing in municipal securities can be a very lucrative option. Bonds can be broken before they mature. Secondary market investors have their share of advantages and disadvantages. The investors must use their prudence and experience.
Last Updated on : 5th July 2013