9 amazing facts about stocks that you didn’t know before

The stock market has always been a subject of fascination, often perceived as a labyrinth of numbers, trends, and sophisticated jargon.

Whether you're a seasoned investor or a curious beginner, there's always something new to learn about this complex, yet incredibly rewarding domain.

In this article, we delve into 9 amazing facts about stocks that you probably didn't know before.

But before we jump into those fascinating tidbits, let's lay down some foundational knowledge.

What does stock mean?

In its simplest form, a stock represents ownership in a company. When you purchase a stock, you are essentially buying a small piece of that company, becoming a shareholder.

Companies issue stock to raise capital for various needs such as research, development, and expansion.

Owning a stock means you own a slice of the company's assets and earnings. There are different types of stocks, such as common stocks and preferred stocks, each coming with its own set of rights and responsibilities.

Common stockholders, for instance, have voting rights in corporate decisions, while preferred stockholders usually don't have voting rights but receive dividends before common stockholders.

Stocks are traded on exchanges like the New York Stock Exchange (NYSE) or the NASDAQ, and their prices fluctuate based on supply and demand dynamics, influenced by various factors such as company performance, economic indicators, and market sentiment.

The aim for most investors is to buy stocks at a low price and sell them at a higher price, thereby making a profit.

However, some investors also aim for long-term gains through dividends and stock price appreciation over time.

Why is it important to invest in stocks?

Investing in stocks has multiple benefits that make it an essential part of a balanced financial portfolio. Here are some reasons why investing in stocks is important:

1. Potential for High Returns: Historically, stocks have provided a higher average annual return compared to other investment vehicles like bonds or savings accounts.
2. Liquidity: Stocks are highly liquid assets, meaning you can easily convert them into cash.
3. Diversification: The stock market offers a wide array of sectors and industries to invest in, from technology and healthcare to consumer goods and utilities.
4. Ownership and Voting Rights: Holding a company's stock means you are part-owner of the company, often complete with voting rights on corporate decisions.
5. Dividend Income: Some stocks pay dividends, providing a steady income stream. Dividends can be reinvested to buy more shares, leveraging the power of compound interest.

Investing in stocks isn't without risks, but understanding these risks and how to mitigate them can open the door to significant financial growth and security.

Whether you're interested in short-term trading or long-term investing, the stock market offers opportunities for all types of investors.

9 intriguing facts to know about stocks

1. Stock market is older than the Taj Mahal

When we think of ancient landmarks, monumental structures like the Taj Mahal often come to mind.

However, you might be surprised to learn that the concept of the stock market predates even this iconic marvel.

The Amsterdam Stock Exchange considered the world's first official stock exchange, was established in 1602. This was almost 30 years before the construction of the Taj Mahal began in 1632.

The Amsterdam Stock Exchange allowed for the trading of shares of the Dutch East India Company and marked the birth of the modern capitalist system.

Well, this just goes to show that the stock market is not a modern invention but a financial institution deeply rooted in history.

2. Approach market news with a healthy dose of scepticism

In the age of instant information, news alerts about stocks can be a double-edged sword. While it's crucial to stay updated, you should also approach market news with a healthy dose of scepticism.

Market rumours, speculation, and even organized misinformation campaigns can manipulate stock prices, often causing unwarranted volatility.

Professional traders sometimes use the news as a smokescreen to disguise their real intentions, leading average investors astray. It's essential to differentiate between news that genuinely affects a company's intrinsic value and news that is just "noise."

Always cross-reference news from multiple reliable sources and, if possible, consult with financial advisors before making any major investment decisions based on news.

3. The October effect: Myth or Reality?

You may have heard about the supposed curse of the "October Effect," the belief that stock markets are more likely to crash in October.

Famous market crashes like the one in 1929 and Black Monday in 1987 both occurred in this month.

While it makes for an intriguing narrative, the October Effect is largely considered a psychological anomaly rather than a statistical reality. Comprehensive studies show that market volatility is not significantly higher in October when compared to other months.

But the fear perpetuated by historical events makes investors extra cautious, creating a self-fulfilling prophecy of sorts.

4. The Power of Dividends

Dividends may seem like small, occasional bonuses for holding onto a stock, but their long-term impact can be astounding. Reinvesting dividends can supercharge your investment thanks to the power of compound interest.

According to various studies, dividends have accounted for about 40% of the total returns of the S&P 500 since its inception. The reinvestment of these dividends has been a cornerstone for many successful long-term investment strategies.

Don't underestimate these modest payouts; they could make a substantial difference in your portfolio's value over time.

5. Costliest stock in the world

When you think of expensive things, you might think of luxury cars, precious gems, or rare artefacts. But did you know that some individual stocks are so expensive that they can easily overshadow the cost of such luxuries?

Berkshire Hathaway Inc., led by the iconic Warren Buffett, holds the record for the most expensive individual stock.

Unlike other companies that split their stock to make it more accessible to average investors, Berkshire Hathaway has refrained from doing so, keeping its share price astronomically high.

This has created an exclusive aura around owning a Class A share, making it one of the intriguing aspects of the stock market.

6. The bull and the bear market

The terms "bull market" and "bear market" are more than just Wall Street jargon; they signify the mood and direction of market participants.

In a bull market, investors are optimistic, leading to rising stock prices. In a bear market, pessimism reigns, and stock prices generally decline. But did you know the longest bull market in U.S. history ran for 11 years, from March 2009 to February 2020?

On the flip side, the most prolonged bear market during the Great Depression lasted from 1929 to 1932.

Understanding the historical lengths and impacts of these market conditions can provide valuable context for current market behaviour.

7. Stocks were once traded in coffee houses

Long before the advent of modern stock exchanges, stock trading had rather humble beginnings.

In the late 17th century, stocks were traded in coffee houses. London's Jonathan's Coffee House was one such venue where brokers and traders would meet to conduct their business.

It was so pivotal to the trading scene that it eventually evolved into the London Stock Exchange.

8. Flash crashes can happen in minutes

When we think of market crashes, we often envision prolonged periods of decline. However, "flash crashes" can send the market plummeting within a matter of minutes. One of the most infamous flash crashes occurred on May 6, 2010, when the Dow Jones Industrial Average dropped nearly 1,000 points in just a few minutes before mostly recovering.

The root causes of flash crashes can vary from algorithmic trading to human error, but they serve as a reminder of the market's unpredictable nature.

9. The 'January Effect' and seasonality

Many investors swear by seasonal trends in the stock market, one of which is the "January Effect." According to this phenomenon, stocks, particularly small-caps, tend to perform better in January than in other months.

Some attribute this to tax considerations, as investors who have sold off stocks in December to harvest tax losses re-enter the market in January.

While not entirely consistent, the January Effect has been substantial enough to attract attention from both academic researchers and market practitioners alike.

Final thoughts

The world of stocks is teeming with fascinating facts and hidden treasures of knowledge.

Understanding these can offer more than just cocktail party trivia; they can provide valuable insights that may inform and enrich your investment strategies.

Now that you're armed with these 9 amazing facts, why not put your newfound knowledge to the test?

If you're inspired to dig deeper and explore the thrilling world of stock trading, consider signing up with markets.com, a leading stock CFD trading platform.

Offering a wide range of resources for both beginners and experienced traders, markets.com can be your go-to platform for engaging with the stock market in a dynamic and informed manner.

Ready to take the plunge into the world of stocks? Don't let this opportunity slip by. Start your trading journey today!

Read this important related article: How Do Share CFDs Work? A Comprehensive Guide for Beginners

When considering ‘’CFDs’’for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.”