In the past two articles, I had talked about the basic requirements and things to consider while investing in the share market. With those two articles in check, you are ready to invest in the share market. In that article, I also had talked about IPO/Primary Market being better for beginners to start with. You might wonder how does that matters, it’s just the same share market.
So, here is an article about why IPO is better than Secondary Market for Beginners.
Easier to Invest
IPO or primary market is easier to invest in rather than the secondary market. To invest in an IPO you just need DEMAT, C-ASBA, and Mero Share account. Whereas in the secondary market you also need a Broker account. To invest in an IPO, you need to apply from MeroShare acc sitting at home when a company opens an application for the share. In the secondary market, you buy the shares listed on the Nepal Stock Exchange (NEPSE). You also need to contact a brokerage firm to buy shares from the secondary market.
Less Money to Invest
A company issues IPO when it wants more capital to run. They issue it at Rs.100 (or rs.10) per kitta/unit. So, for IPO you pay Rs. 100 per unit or Rs.10 and apply for a minimum of Rs. 1000. But in case the IPO gets oversubscribed, you only get 10 kittas or 100 kittas worth Rs.1000. Some even return empty-handed. In the secondary market, the price of the share is according to the NEPSE market value which could be even around 100 and up to 19-20 thousand.
Low-Risk, High Reward
In IPO you only spend Rs.1000 with a price of Rs.100 per kitta or even 10. The price of the share getting below is way too less. Whereas, In the secondary market, if you buy a share at 750 per kitta, the price might increase to 1500 and with IPO too, the chances of a share getting from 100 to 1000 or 1500 are also possible. But the downside is there are also high chances your share value decreases from 750 to 300 per kitta.