PRIMARY MARKET AND SECONDARY MARKET

The primary market is where securities are created.

A primary market is a source of new securities. Often on an exchange, it's where companies,
governments, and other groups go to obtain financing through debt-based or equity-based securities.
Features of primary market:
New Issues: The fundamental feature of the primary market is that it is associated with new issues. That
is why the primary market is called as the (NIM) new issue market.
Place: Primary market is not a particular place but an activity of issuing, buying, and selling.
Floating Capital: Primary market issues capital through public issue, offering for sale, private placement,
and right issue.
This is how the capital is raised for funding the companies and the government.
It comes before the Secondary Market. All the transactions are primarily made in the primary market.
Secondary market comes much later.

A secondary market is the one in which the securities of the companies are traded among the investors.
That means, the investors can buy and sell securities freely without any intervention of the issuing
company.
Features of secondary market:
Liquidity: The secondary market provides liquidity to all the traders. Any investors/ sellers who are in
need of money can sell their securities to any number of buyers.
Adjustable Price: Any development in the securities leads to price fluctuation in the market. The market
adjusts itself to the price of the new securities.
Transaction Cost: The transaction cost in the secondary market is very low due to the high amount of
transactions.
Rules: The investors in the secondary market have to follow all the rules given by the stock exchange
and the government. Higher rules and regulations ensure the safety of securities of the investors.
So, these are some of the features of the primary and secondary market.
It is interesting to note that both primary and secondary markets are used for buying and selling of
shares and debentures. Both these markets fund the companies, investors, and the government.
However, with the profit yielding, associated risks also come along.
Therefore, it is advised to invest after having knowledge about the advantages and disadvantages of the
market. Thus, primary and secondary markets are essential for profit earning and funding of companies.
The key distinction between primary and secondary markets: the seller or source of the securities. In a
primary market, it's the issuer of the shares or bonds or whatever the asset is.
In a secondary market, it's another investor or owner.
When you buy a security on the primary market, you're buying a new issue directly from the issuer, and
it's a one-time transaction.
When you buy a security on the secondary market, the original issuer of that security—be it a company
or a government—doesn't take any part and doesn't share in the proceeds.
Both Primary Market vs Secondary Market are popular choices in the market; let us discuss some of the
major differences :

The securities are initially issued in a market known as Primary Market, which is then listed on a
recognized stock exchange for trading, which is known as a Secondary Market.
The prices in the primary market are fixed whereas the prices vary in the secondary market depending
upon the demand and supply of the traded securities.
In the primary market, the investor can purchase shares directly from the company. In the Secondary
Market, investors buy and sell the stocks and bonds among themselves.
In the primary market, security can be sold only once, whereas in the secondary market it can be done
an infinite number of times.
In the Primary Market, the amount received from the securities is the income of the company, but in the
Secondary Market, it is the income of investors.
The primary market is rooted in a specific place and has no geographical presence as it has no
organizational set up. Conversely, the Secondary market is present physically, as a stock exchange,
which is situated in a particular geographical area.
Investment bankers do securities trading in the case of the Primary Market. Conversely, brokers act as
intermediaries while trading in the secondary market.

MONEY MARKET AND CAPITAL MARKET

The money market and the capital market are the two different types of financial markets wherein the
money market is used for short-term borrowing and lending. In contrast, the capital market is used for
long-term assets, i.e., assets which have a maturity of more than one year.
They have a direct or indirect impact on the capital. Capital markets include the equity market and the
debt market.
The money market is a good place for individuals, banks, other companies, and governments to park
cash for a short period of time, usually one year or less.
Money markets are unorganized markets where banks, financial institutions,
money dealers, and brokers trade in financial instruments quickly.
The capital market is a type of financial market where financial products like stocks, bonds, are traded
for a long time.they serve the purpose of long term financing and long term capital requirement.
Capital markets consist of two categories:Primary market and secondary market.
The key difference between money market and capital market are this
Short-term securities are traded in money markets, whereas long-term securities are traded in capital
markets.
Capital markets are well organized, whereas money markets are not that organized.
Liquidity is high in the money market, whereas liquidity is comparatively low in capital markets.
Due to high liquidity and low maturity duration in money markets, instruments in money markets are a
low risk, whereas capital markets are comparatively high risk.
A central bank, commercial banks
and non-financial institutions majorly work in money markets, whereas stock exchanges, commercial
banks, and non-banking institutions work in capital markets.
Money markets are required to fulfill the capital needs in the short term, especially the working capital
requirements. Capital markets are required to provide long-term financing and a fixed capital
for purchasing land, property, machinery, building, etc.
Money markets provide liquidity
in the economy where capital markets stabilize the economy due to long-term financing and savings
mobilization.
Capital markets generally give higher returns, whereas money markets give a low return on investments.
In conclusion Both are part of the financial markets. The main aim of the financial markets is to channel
funds and generate returns. The financial markets stabilize the money supply by lending borrowing
mechanism, i.e., surplus funds are provided to borrowers by the lenders.
Both are required for the betterment of the economy as they fulfill the business and industry’s long-
term and short-term capital needs. The markets encourage individuals to invest money to gain good
returns.
Investors can tap into each of the markets depending on their needs. Capital markets are generally less
liquid but provide good returns at higher risk, whereas money markets are highly liquid but provide
lower returns. Money markets are also considered safe assets.
However, market anomalies and inefficiency due to some aberrations above may not hold. Due to such
irregularities, investors look for arbitrage opportunities to get higher returns. Money markets are
considered safe, but they sometimes give negative returns. Thus, investors should study the pros and
cons of each financial instrument and the condition of the financial market before putting their money
for the short term or long term.

EQUITY MARKET AND DEBT

Equity market is a place where stocks and shares of companies are traded.
Equity, or stock, represents a share of ownership of a company.
The owner of an equity stake may profit from dividends.
Dividends are the percentage of company profits returned to shareholders. The equity holder may also
profit from the sale of the stock if the market price should increase in the marketplace.
The debt market is where investors buy and sell debt securities, mostly in the form of bonds.
The debt market, or bond market, is the arena in which investment in loans are bought and sold.
There is no single physical exchange for bonds.
Transactions are mostly made between brokers or large institutions, or by individual investors.
Equity markets are suitable for investors that have a high-risk profile and a better investment budget to
safeguard against market fluctuations.
Investors with a long-term investment horizon and are able to ignore the short-term volatility can also
invest in equities and equity-related instruments as they ultimately yield higher returns in the long term.
Equity markets are also suitable for investors that have good knowledge about the technical and
fundamental aspects of investing in stocks and can undertake thorough research and analysis of the
companies, markets as a whole as well as national and international factors that can affect the stock
prices.
Debt markets are the opposite of equity markets and hence are ideal for investors with a lower risk
appetite.
They are suitable for investors who want to limit their exposure and require a fixed source of earning or
a fixed secondary income at the same time want the security of their capital investment.
Debt markets do not require in-depth research and analysis of debt instruments, especially in the case
of government-backed debt instruments like bonds.
Hence, they are also a good option for investors who do not have a thorough knowledge of the stock
markets nor have the time for adequate research and analysis required for the same.
In conclusion Equity markets and debt markets are the pillars of investing.

INVESTMENT AND FINANCE

Financing is the act of obtaining money through borrowing, earnings or investment from outside
sources. Investing is the act of obtaining money by building up operations or purchasing investment
products such as stocks, bonds and annuities.
Investing means allocating money with the expectation of a positive profit and return in the future.
In other words, investing means having an asset or commodity that is introduced for the purpose of
generating income