Chapter: 5 Investing in Stocks

Section: 6 Where do I Buy Stocks?

  • Secondary Market
    Quoted stocks and other financial instruments are traded in the secondary market. Existing quoted company shares can be bought or sold in the secondary market through a stockbroker. A broker is a licensed agent authorized by the regulatory bodies to help investors in buying and selling.

  • Initial Public Offering (IPO)
    Alternatively one can invest in shares through subscribing to an IPO. When a company reaches a certain stage in its growth, it may decide to issue stock, or go public, with an IPO. The objective may be to raise capital, to provide liquidity for the existing shareholders, or a number of other reasons. In most cases, investors expect the IPO price to be lower than the stock's actual fair market value. A very good example is the IPO of Saudi Telecom Company where the market price in the months after the IPO was much higher than the price at which it was offered to the investors.