In this guide, you are going to learn to invest in the Secondary Market in Nepal. Furthermore, you will also learn about the secondary market, and its advantages and disadvantages.
You can enter the secondary market without entering in primary market but most people prefer not to skip the primary market.
What is a Secondary Market in Nepal?
A secondary market is a market for securities and other financial institutions that already exist. It means trading stocks that have already been issued by companies and corporations.
Unlike the primary market where new stocks and securities are sold by the issuing company, the secondary market involves purchasing existing stock and securities.
The main motive behind buying old stocks or securities is buying them at a lower price than their original selling price.
So we can say that there is always a chance that you will make a profit if you buy stocks when they are at a lower price as compared to their original value. If you buy stocks when they are overpriced, it will be very difficult for you to gain profit from the secondary market.
Benefits of Investing in the Secondary Market in Nepal
A secondary market is a place where investors and brokers trade stocks and other commodities. When people think about secondary markets, the first thing that comes to their mind is stocks because they are most commonly traded but there are also other types of secondary markets such as mutual funds and debentures.
- It offers investors to make good gains in a shorter period.
- You can evaluate a company’s growth effectively.
- Trading in this market does not require a large sum of money to start so you can start without facing many hardships.
Everything that has pros, also has its cons and the secondary market is no exception.
Disadvantages of Secondary Market
- There are sudden price fluctuations that can lead you to loss.
- You should invest your time looking at charts to find the perfect time to buy or sell stocks, which are not 100% accurate.
- Changes in government policies can be a hindrance in secondary markets.
- You will not get 100% of your money after selling your stock because you will have to pay broker fees.
If you are looking for BUY/SELL Commission Calculator in Nepal then please visit our homepage or click the link below.
There are certain things that you should keep in mind if you are thinking to invest in the secondary market in Nepal and some things you should do beforehand. Here you will see step by step guide to entering the secondary market.
1. First and Foremost: Make a DEMAT account
Opening a DEMAT account should be your topmost priority if you want to enter the market, may it be primary or secondary. Most banks and stockbrokers are there to provide you with this service.
You can see the list of brokers in Nepal that are licensed by NEPSE.
Nowadays, you can also create a DEMAT account online.
2. Knowledge of Market
To get involved in the secondary market, it is very essential to know how the market functions. The Securities Board of Nepal (SEBON) is a useful source to get primary information. You can get information about upcoming public issues from SEBON.
Similarly, for the secondary market, you can access Nepal Stock Exchange and its mobile application for hands-on information. Other websites will provide you with valuable information.
3. Getting involved in Primary Market
The best experience you can get in the primary market is by applying for primary offers in the primary market. There are two types of offers in the primary market they are Initial Public Offerings (IPO) and Further Public Offerings (FPO).
When a company issues an IPO, you can buy at a face value of NPR 100 per kitta (stock) or premium per their valuations. The best thing about the primary market is that the risk is very low when you buy the stock at NPR 100. Later you can sell your stock when the price increases.
News about these issues is available in the newspaper, on Facebook pages, and on other related websites.
4. Getting involved in the Secondary Market
Basic information you should have about the secondary market is that all the stocks that are offered by the primary market are listed in the secondary market i.e. in NEPSE (Nepal Stock Exchange).
The secondary market gives us a platform to buy and sell shares. The value of a share changes frequently based on demand and supply.
If you want to invest in the secondary market, first of all, you need to open a transaction account (TMS Account) at the broker’s office.
There are different stock brokers with proper licensing by NEPSE. After you open this account your broker will give you a unique ID with which transactions can be done in your name.
At the End
Before you jump into investing in the secondary market in Nepal, you should do thorough research. Read the annual reports of different companies and find out those who are expecting a huge leap in their business trends.
Keep in mind; money without knowledge is only going to make you lose money. So next time you decide to invest in the secondary market, always invest with caution or look for a trusted adviser or an investment platform instead.
Happy Trading, Happy Investing!