It is also worth mentioning that the stock market isn’t exactly like a grocery store. To buy and sell stocks, you need to go through an intermediary known as a licensed brokerage. That’s because the stock market is a secured and regulated environment where market participants can trade shares with low, if not zero operational risk.
The stock market also acts as primary markets and secondary markets. Now, what do I mean by that? For starters, the primary market is where shares are issued and sold to investors for the first time through the process of an initial public offering (IPO). If you’re passionate about getting into the investment world, you may have heard about the most recent popular IPOs like Airbnb (NASDAQ: ABNB) or Roblox (NYSE: RBLX). Above all, this process allows companies to raise capital from investors.
Following the IPO process, the stock exchange serves as a trading platform that facilitates regular buying and selling of the listed stocks. This constitutes the secondary market. The stock market exchange earns a fee for every transaction that occurs on its platform during the secondary market activity. When buying stocks on the primary market, investors are purchasing stocks directly from the issuer. The secondary market is where existing stocks are traded between investors or traders.