What is a secondary market?

It is a place where previously issued securities such as stocks and bonds are traded among investors. Securities here can be bought from other investors rather than the organisation that is issuing it. The proceeds of the sales do go to the investors and not the issuing company. The major difference between a primary and secondary market is when the securities given by the issuing organisation for the first-time, they go to the capital, of the issuing company. So before you hop on to a decision to invest in these markets, read further to understand the dos and don’ts.

  • Checking the company’s credential, its management, fundamentals and recent announcements before you invest will be beneficial in getting clarity. You should check the company’s information on the website of the exchanges and companies, databases of data vendors, business newspapers and magazines.
  • Assessing the risk-return profile of the investment, the liquidity and safety aspects before you make your investment decisions is always beneficial.
  • Ensure your transaction are made only through SEBI-registered brokers or sub brokers.
  • Make transaction only through SEBI-recognised stock exchanges and deal through SEBI-registered brokers or sub brokers.
  • If your transactions are not frequent a freezing facility is provided which you can make use of.
  • Don’t forget to take account of potential risks involved in any investment or undertake off-market transactions.
  • Avoid unregistered intermediaries and do not fall prey to promises of unrealistic returns or guaranteed returns.
  • Do not invest on basis of hearsays, rumours and tips and don’t invest on sudden spurts in trading volumes or prices or favourable articles or stories in the media.
  • Evade pitfalls by avoiding the heard, playing on momentum, or following investment advice given on TV channels, websites or SMSes.
  • It’s not advised to imitate investments decisions of others who may have profited from their investment decisions, nor is timing the market is suggested.
  • Advertisements on financial performance of companies can be misleading and its best not to be carried away.
  • Media reports at times on corporate developments could be misleading, and it’s advised you do your own research before investing.
  • If you have certain doubts or grievances, you should approach the authorities for redressal.
  • Do not leave a signed blank Delivery Instruction Slips (DIS) of your Demat account in the open or hand it over to your broker.
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