If you’re looking at investing in the stock market, you’ll need to know some fundamental facts about stocks to succeed.
In its simplest form, the stock market is like knowing the exact amount of chilli to add to your recipe.
You don’t want something too bland, or something so hot that it sets your mouth on fire.
Knowing the right amount requires knowledge and experience.
If you want to succeed in the stock market, and at cooking–then knowing the right formulas will help!
Keep reading this article to understand the 25 most important facts about the stock market before making your first investment.
#1. The Stock Market Is More Than 400 Years Old
The stock market is one of the oldest forms of investment in the world.
It’s believed that the Dutch East India Company1 created a rudimentary form of the stock market back in 1602, known as “stocks.”
#2. There Are More Than 60 Stock Exchanges in the World
In modern times, there are more than 60 stock exchanges in the world.
The most famous of them is called NYSE Euronext, and it’s located on Wall Street.
There are also other big players like NASDAQ2 and hundreds of smaller ones that help to support financial markets all over the planet.
#3. Annually, The Stock Market Is Likely to Increase by 70%
There is a 70% chance the stock market will go up on any particular year, and only about 30-40% odds of it going down.
This makes it an attractive investment for many people who want to make money from their savings.
#4. October Is the Most Volatile Month
Many people believe that October is a very volatile month for stocks, which might be because it’s near the end of the fiscal year in many countries.
It can also be related to the fact that during this time,
There are more rumors about prospective corporate takeovers as well as other significant economic events happening around the world.
#5. September Is the Worst Month
One of the worst months for stocks is September.
This might be because people are so excited about how much they made during October that many investors decide to sell their shares to make a profit, which causes the stock value to drop.
#6. The Most Expensive Share Is Berkshire Hataway
The most expensive share in the world is Berkshire Hataway.
It has a current valuation of about £214 billion, making it over three times as big as Pepsi or Coca-Cola.
#7. The Earliest Investing Book Dates From 1688
The earliest investing book published in the world is called “Principles of Trade”.
A trader named Nicholas Barbon wrote it back in 1688, making him a first in the sector to put together an investment guide.
#8. The First Stock Market Bubble Dates From 1720
A lot of people believe that the first stock market bubble was back in 1720.
This happened when John Law created an investment bank that had shares issued for it, but he also printed more money to invest.
The result was that not only did prices start going up as well as down quickly and wildly,
But this led to many other speculation-driven bubbles happening over the next century or so.
#9. Microsoft Breached the £1 Trillion Threshold
In April 2019 Microsoft was the first company to ever reach that figure, with Apple being the second.
These companies are valued at £909 billion and £893 billion, respectively.
#10. Top 100 Companies Distributed £704 Billion to Shareholders
In total, £704 billion has been distributed to shareholders by the top 100 companies in the past 12 months.
This is a tremendous amount of money that reflects how much return on investment they’re offering investors for putting their funds into these stocks.
#11. Even Pirates Have a Stock Market
One of the earliest known was in 1783 when they were living in a piracy haven called Nassau,
Which is part of what’s now considered to be The Bahamas.
12. The Stock Market Recovers Relatively Quickly
The stock market is generally able to recover relatively quickly after it crashes.
In the 1930s, for example, it took about four years before stocks went up again following a crash in 1929 and subsequent depression of the economy due to The Great Depression.
#13. There Are More Mutual Funds Than You Think
There are more mutual funds than you might realize.
There’s been a total of £51 trillion worth of investments in these types of accounts over the last 15 years.
#14. Shares Were Traded With Fractions
Shares were traded with fractions until 2001,
Which means that an investor who bought a share at £100 might have owned 0.004 of the company instead of just one whole share.
#15. The Dutch East India Company Was the First Multinational Corporation in Existence
The Dutch East India Company was the first multinational corporation in existence, and it traded everything from spices to silk, which made its stock very valuable.
#16. Calculated Risks Usually Mean More Rewards
People make money in the stock market by buying stocks3of companies they think are undervalued and will eventually appreciate.
They can also buy options contracts or use margin lending to magnify their returns on investments.
#17. You Have a many Options When It Comes to Trading Stocks
Shares of stocks trade on the stock market.
This is where they can be bought and sold depending on what people are willing to pay for them at a given time.
Shares also trade in individual companies, but only among those who have ownership stakes in that company’s shares (i.e., shareholders).
#18. Buy Low & Sell High
The most basic way to make money in stocks is to buy low and sell high4.
When a stock’s price drops, it becomes cheaper for those who bought the shares earlier to turn around and sell them at a profit.
#19. Stock Charts Don’t Have To Be Hard
A chart is a graphical representation of how the price of a stock has changed over time.
Charts are useful because they can help people make better decisions about when to buy and sell stocks, as well as which ones might be suitable for investment.
#20. There’s No Such Thing As a Sure Thing
Stock analysts often make predictions about whether a company’s stock will go up or down.
However, there is no such thing as a sure thing when it comes to predicting the future of stocks.
#21. There’s No Perfect Metric
There are a number of different metrics analysts use to judge whether or not stocks will be profitable.
However, there is no “perfect” metric that can predict future stock performance with certainty.
#22. Dividends Are Your Most Trusted Friend
Dividends are payments that companies make to their investors.
They’re a way for the company’s profits – and the investor’s investment – to grow at a regular rate, rather than relying on price changes in order to see growth.
#23. There’s More to Stocks Than Just the Price Tag
One of the most common misconceptions about stocks is that a $100 stock must be more expensive than a $20 stock.
In reality, it’s fairly typical for companies with lower market capitalizations to have higher price-to-earnings ratios5.
#24. Taxes Can Cut Into Your Profit
Unless you are holding an individual stock that pays qualified dividends,
Or a mutual fund with at least 90% of its investments coming from stocks that pay qualified dividends, taxes will likely take a bite out of your profit.
#25. Assess Your Needs & Goals
It’s important to know what type of stocks you’re buying, and how much the commissions will be.
Some brokers offer commission-free trades for verified accounts or if you deposit a minimum amount into your account each month.
What Are Stocks?
Stocks are a share of ownership in that company. When you buy stocks, your investment is going toward the future growth and success of the companies with which you’re partnered.
What Factors to Consider When Buying Stock?
There are a number of factors to consider when choosing which stocks to buy. For example, you might want to find companies that have been around for at least 50 years and pay dividends, or high-risk stock with the potential for higher returns.
Is It Safe to Invest in Stocks?
It’s safe to invest in stocks, but there are risks involved. Stocks can fluctuate up and down according to the company’s performance.
What Are the Benefits of Being a Stockholder?
The benefit of owning stock in any company is that you have an economic interest in its future performance.
You also may be entitled to voting rights. If your shares go up substantially, then you can sell them at a profit and reinvest this money into other stocks or assets.
Who Can Buy Stocks?
Anyone with enough money to do so. There are no restrictions on who can buy stocks. Still, the minimum purchase is usually set, and these types of transactions must happen through a broker or other intermediary.
How Are Stock Prices Determined?
Stock prices go up and down based on supply and demand. When the demand for a particular stock outweighs available supplies, its price will rise. The opposite is also true: when there are more sellers than buyers, stocks fall in value.
The stock market is a volatile place, but it can be rewarding if you understand the risks and rewards.
Investing in stocks will always have its ups and downs. A long term plan is a good ingredient for success.
Do your research and know all the facts about stocks before diving into investing for the first time.