Primary vs Secondary Market.

In plain English

The primary market and the secondary market describe two stages in the life of a stock or bond. In the primary market, a company or government sells a brand-new security directly, such as in an initial public offering, and that money goes to the issuer. In the secondary market, investors buy and sell those already-issued securities among themselves on exchanges, and the money flows between investors, not to the original issuer. Most trading you do in a brokerage account happens in the secondary market.

01Why it matters

Knowing the difference tells you where your money actually goes: buying in the primary market funds the company directly, while buying in the secondary market just transfers ownership from one investor to another.

02The math, step by step

When a company does its IPO and sells shares at 20 dollars each, that is the primary market and the company keeps the cash. The next day, when you buy 10 of those shares on an exchange for 22 dollars each, that is the secondary market. Your 220 dollars goes to the investor who sold to you, not to the company. In U.S. markets, that trade now settles in one business day, known as T+1.

03What this is NOT

04Receipts

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