Navigating the secondary market is like setting the itinerary for a trip. Picking a destination is one thing. Figuring out where to go and what to do once you’re there is another entirely.
There are many variables to consider when planning to invest in secondary markets — and equally as many opportunities. For those looking to invest in private markets, it’s important to understand these complexities first, before plotting a route to success.
We’ve already broken down the differences between primary vs. secondary markets, and public vs. private secondary markets. Now, let’s look at some of the benefits of investing in the latter.
The secondary market plays a crucial role in the market’s liquidity, which refers to the ease with which an investment can be sold.
By providing the ability to buy and sell assets quickly, the secondary market increases the flow of activity, allowing investors to access cash without diminishing an asset's value. Regulated exchanges like the Nasdaq or NYSE facilitate efficient pricing of stock through continuous trading. Because of this, shares of public companies are typically considered highly liquid.
The same hasn’t been said for stock in private companies — or, at least, not historically. In the past, there weren’t many avenues for shareholders of private companies to turn their holdings into cash, short of an acquisition.
But that’s not necessarily the case anymore. Augment Capital provides a platform for trades between shareholders of private companies and accredited investors looking to buy in. While this can potentially enhance liquidity for private company shares, it's important to note that trading these shares may involve different risks compared to public companies. Investors should consider these factors carefully.
It’s best practice for any portfolio to be diversified, or for the investments within it to be spread across various asset classes.
This is especially true when investing in private markets, where there is still relatively less liquidity compared to public markets, and consequently a higher risk profile. Fortunately, there is no shortage of opportunities for diversification in secondary markets.
Augment enables investors to purchase stock in companies not traded on public exchanges, such as Databricks, Scale AI, and Stripe. These private firms may not be subject to the same market shocks as public ones, and could potentially provide unique protection to portfolios.
You’ve heard of “first-mover advantage” — the competitive edge gained by a company that establishes itself early in an emerging sector. More often than not, startups enjoy this advantage instead of publicly traded companies. For a public company, “moving first” would be like an ocean liner outracing a speedboat.
Similarly, those who solely invest in public markets may not see the same gains as those who invest in pre-IPO companies. Many early-stage investment opportunities have the potential for explosive growth. And with companies increasingly opting to stay private for longer, due to a recent surge in primary fundraising, the bulk of that growth might occur before the company’s shares even reach the public markets.
Augment aggregates these opportunities on a single marketplace, making them easier for investors to study, compare, and trade.
For investors looking to build a liquid, diversified, and uniquely positioned portfolio, it might be the ideal time to take a second look at the private secondary market.
Platforms like Augment are making these highly advantageous transactions increasingly accessible. But private market investing has yet to go fully mainstream. So for now, the advantage is reserved for those who get in on the ground floor.
*Securities transactions are executed through Augment Capital, LLC (member FINRA/SIPC). Investments in private securities are only available to qualified accredited investors and involve substantial risk, including potential loss of principal.
Important Disclosures: Investing in private securities involves substantial risk, including the potential loss of principal. Private securities are typically illiquid, have limited pricing transparency, and often require longer holding periods. These investments are available exclusively to qualified accredited investors and offer no guarantee of returns. Additionally, past performance of private securities does not indicate or predict future results.