Page 12 - Initial Public Offering - An Introduction to IPO on Wall Street
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12. Stock Markets ............................................................................................................179
12.1 Understanding the Stock Market ................................................................................. 179
12.1.1 How the Stock Market Works ................................................................................... 180
12.1.2 Functions of a Stock Market ..................................................................................... 182
Secondary Market ..................................................................................................................... 182
Economic Health ....................................................................................................................... 182
Reliability of a Business ........................................................................................................... 182
Safe Transactions ...................................................................................................................... 182
Fund Mobility ........................................................................................................................... 182
Efficient Price Discovery .......................................................................................................... 183
Liquidity Maintenance .............................................................................................................. 183
12.1.3 Stock Market Participants ......................................................................................... 183
Stockbrokers ............................................................................................................................. 183
Portfolio Managers.................................................................................................................... 183
Investment Bankers ................................................................................................................... 183
Custodian and Depot Service Providers ................................................................................... 183
Market Maker............................................................................................................................ 183
12.2 Principles...................................................................................................................... 184
12.2.1 Diversify ................................................................................................................... 184
12.2.2 Buy and Hold ............................................................................................................ 184
12.2.3 Limit Taxation .......................................................................................................... 184
12.2.4 Employ Risk Management Strategies ....................................................................... 184
12.2.5 Learn to Anticipate Market Volatility ....................................................................... 185
12.2.6 Consider Fees ............................................................................................................ 185
12.3 Types ............................................................................................................................ 185
12.3.1 Over-The-Counter ..................................................................................................... 185
Explanation of OTC .................................................................................................................. 185
Real-World Examples of OTC Stocks ...................................................................................... 186
How to Trade OTC Stocks ........................................................................................................ 186
12.3.2 Exchange ................................................................................................................... 187
Types of Stock Exchanges ........................................................................................................ 189
13. Modern IPOs ..............................................................................................................190
13.1 How Modern IPOs Work ............................................................................................. 191
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