Primary stocks and secondary stocks differ in how they are issued and traded in the stock market.

Primary stocks are offered directly by a company for the first time through an Initial Public Offering (IPO) or other fundraising methods. In this stage, the company raises capital by selling shares to the public or institutional investors, receiving the proceeds directly. The main purpose of issuing primary stocks is to raise funds for business expansion, debt reduction, or other corporate needs. Once issued, these shares enter the secondary market.

Secondary stocks, on the other hand, refer to shares that are traded among investors on stock exchanges after they have been initially issued in the primary market. In the secondary market, transactions occur between investors—buyers and sellers—rather than with the issuing company. The company doesn’t receive any funds from these trades; instead, the proceeds go to the selling investor. The secondary market provides liquidity, allowing investors to buy and sell shares easily.

In summary, the primary market is where companies issue new stocks to raise capital, while the secondary market facilitates trading of existing stocks among investors. Both markets are essential, but they serve different functions within the overall financial system.