Who Buys Stocks Sold on the Stock Market?
The stock market is like a market where double auctions take place. This means that every time you put up your stocks for sale at a certain price, there will be an unknown entity that will offer to purchase the same amount of that same stock for a set amount of money for each share. A transaction will take place if both parties agree on a mutual price. During this entire process, it is possible that you will not know what entity or who is on the other end of the stock transaction.
This raises the all important question – who really buys the stocks being sold on the stock market?
People like yourself, or the so-called individual investors, are among those who may purchase your stocks. These individual investors are those women and men who use their personal money to sell and buy securities like bonds or stocks. The stocks they buy might be for their own investment accounts or for their individual account for retirement. They may also buy stocks for their children as a part of the trust to create resources that they can use for their education. These individual investors might also be just interested to get the dice rolling with their excess funds to see if they could earn a significant return. This 21st century alone, millions of Americans were revealed to own stocks either as part of mutual funds or through individual shares.
An institutional investor is another entity that could have purchased the stocks you sold. These institutional investors are personas or organizations that make stock trades of substantial size that entitle them to getting a discount on their trades. These institutional investors may include mutual fund companies, charitable foundations, pension funds and insurance companies.
The Company Itself
Every now and then, a company may also decide to buy back its own shares that are in the open market. They might decide to go this route to boost the demand for their stocks through cutting back the available supply. They might want to increase the possible reward for every remaining shareholder. A company’s board of directors might also think that the own stock of the company is a much better investment compared to other available options like saving their extra fund in the bank at low interest rates.
A market maker might be the entity on the other end of the sale transaction for your stocks. This is especially so if your stocks happen to be over the counter stocks. These market makers are the companies that are always prepared to purchase the stocks of a certain company at a price listed in public during normal business hours. The market makers offer a significant market for stocks in the companies that don’t trade often since they help in maintain the liquidity of the marketplace as a whole. It is more likely for investors to purchase a stock if they are sure that there are ready buyers once it is time for them to sell.