What Does "Secondary Market" Mean?

A Secondary Market is where the investors buy or sell already owned equity. The stock market where the equity is first issued is called the primary market, whereas, the stock exchange is where the equities are typically bought and sold is a form of the secondary market. There are a lot of different equities you can buy in the secondary market, hence it is important to understand the features of a good secondary market investment opportunity.

To help you with the same, here are a few points -

1) They have a compelling USP

USP, short for, Unique Selling Point is essentially the one thing that differentiates one company’s business model from another. This feature can be found in the product/service offered, the market penetration strategy adopted, etc. As an amateur, it is best to invest in private equities that are easily differentiated from each other and have a strong unique selling point.

2) They have multiple growth avenues

A company that is worth investing in does not limit its sources of income. This is one of the most important features to look for when investing in a company that is a part of the private market. The increasing number of income streams and encompassing different growth avenues helps the business to avoid reaching its saturation stage at the earliest. Even if the company has not expanded its business operation in multiple industries, it should at least have multiple sources of income from its primary industry of operation.

3) They have a reasonable cost of operation

The way one spends his/her money says a lot about their personality. Similarly, the way a private market company spends its capital says a lot about its scope of success and the ethics it follows. Good private equity investment options have a low or a decreasing cost of operation year over year. They not only account for every spend but also are in a continual process of minimizing their expenses.

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