The secondary market is where investors purchase and sell securities that have already been issued. This broad sector offers a wide range of opportunities in various asset classes, from the well-known stocks and bonds of the world to investments that are more niche and nuanced.
Below, we’ll explore the most popular asset classes in the secondary market and discuss how each can potentially benefit investors looking for a diversified portfolio.
Stocks are the most common and well-known asset class. This exchange mechanism helps investors buy and sell shares in publicly traded companies.
The stock market is a central part of the economy. It offers companies the ability to raise money that can be used to accelerate the startup process, expand existing businesses, or consolidate
operations and pay off debt. Because these companies must be public, they are subject to more stringent regulations than other asset classes.
The stock market is valued for its accessibility to individual investors who might not have the capital or accreditation to contribute to other asset classes. Major U.S. stock exchanges include the Nasdaq and the New York Stock Exchange (NYSE) and Nasdaq.
If stocks are the flashy new restaurant with fancy ingredients and cocktails, bonds are the historic neighborhood spots where regulars know what to expect almost every time they visit.
Bonds, debt securities issued by governments and corporations, tend to be less volatile and risky than stocks, offering both fixed and variable rates of return. Some government-issued bonds are even 100% guaranteed. The downside is that bonds offer a lower rate of return, and can’t always keep up in times of high inflation.
Municipal bonds, investment-grade corporate bonds, and high-yield bonds are among the various kinds of reliable, lower-risk investments that can be found in this sector.
The private secondary market refers to transactions involving shares of companies that have not gone public. This sector of the market is now more accessible than ever before thanks to new platforms that facilitate private equity (PE) and venture capital (VC) investments.
Platforms like Augment allow investors to buy and sell existing stakes in private companies or funds before a traditional exit event, such as an IPO or acquisition. This enables individuals and smaller institutions like pensions or endowments to gain exposure to PE funds or VC portfolios from which they may otherwise be excluded, due to high capital requirements.
Augment’s capabilities have created an alternative to traditional venture capital investment, which typically requires larger capital commitments. Additionally, private sector investments such as these have been shown to offer liquidity, helping investors to meet their cash needs.
A REIT (Real Estate Investment Trust) is a company that specializes in real estate by raising funds from investors to purchase properties or their mortgages. A management team oversees the daily operations and works to ensure the REIT remains profitable, with the primary goal of generating a consistent income stream for its investors.
Most REITs are publicly traded entities with shareholders that include individuals and large investors. Public REITs generally ebb and flow with other equities in the marketplace rather than providing a hedge against volatility.
Certain individuals and institutions can also invest in private REITs, which are typically not correlated with traditional investments, potentially offering downside protection.
*Augment is a registered Alternative Trading System (ATS). All securities transactions are conducted through Augment Capital, member FINRA/SIPC. Augment Capital serves as the broker-dealer for transactions executed on the Augment ATS platform.
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.