7 Facts About The Stock Market for Beginners

Investing in the stock market is often the typical advice financial advisors recommend to clients. Because of this famous financial tip, many people immediately buy stocks in massive amounts without understanding what the market is about. Many indeed succeed in investing a large sum in stocks. But it’s also true that many have lost their lifetime savings due to a mindless investment.

Unfortunately, many fail to review and analyse stock indices before choosing a company to invest in and deciding how much of its share to purchase. It’s helpful to do this before investing because it helps an investor ‌estimate the performance of the stocks they’re considering. To make it short, many only buy stocks because someone’s success stories influenced them to invest without knowing more about the market.

If you know someone who’s looking into investing in stocks or you’re considering doing so, this post is for you. Here are some facts about the stock market that you should know before diving into it.

1 - Amsterdam is the birthplace of the first modern stock trading market.

In 1602, even before the stock market reached the U.S., Europe had them first, particularly in Amsterdam, Netherlands. The name of the company that first had it was the Dutch East India Company. Today, the company is still known as a significant company in the birth of stocks. The Dutch East India Company was also the first publicly traded company. 

The company started selling stocks and paying dividend shares to their investors to raise capital. Because of that, the Amsterdam Stock Exchange was born in 1611. 

2 - The stock market is more than 400 years old.

My first fact states the stock market is more than 400 years‌ old. And yet, for many people, the market is still unfamiliar and overwhelming. Indeed, it is the oldest form of investment that we know of. 

Today, the market is still growing and remains one of the best financial investments many prefer. 

3 - Stock investors have risk appetites.

A risk appetite is a term used to describe the risk an investor is willing to accept in exchange for achieving their goal. In finance, they classify risk appetite into three types. They’re the high, moderate, and conservative risk appetites.

If you have a high-risk appetite, it means you’re willing to invest a large sum of money for the possibility of better returns. On the other hand, an investor with a moderate risk appetite is willing to endure short-term losses for the possibility of long-term returns. Lastly, someone with a conservative risk appetite is only willing to invest a specific amount for stable or lower returns.

Knowing your risk appetite before acquiring stocks is critical because it will help you understand how much you can potentially earn and how much you’re willing to lose. 

4 - The New York Stock Exchange and the NASDAQ are the two biggest stock exchanges in the world.

In American movies, they usually portray and talk about the New York Stock Exchange and NASDAQ when talking about stock investments. They do so because those two are the largest stock exchanges in the world. The New York Stock Exchange is also the reason behind the unfortunate Wall Street Crash in 1929.

When the stock prices of The New York Stock Exchange collapsed in 1929, many people were drastically affected. But today, NASDAQ and NYSE continue to be the largest stock exchanges worldwide, where many have significant investments.

5 - There are 60 major global stock exchanges in the world.

Aside from The New York Stock Exchange and NASDAQ, many other stock exchange companies play a crucial role in the market. Aside from the two, there are three large stock exchanges in Asia. They are the Japan Exchange Group, Shanghai Stock Exchange, and the Hong Kong Stock Exchange.

Aside from those three, there are many other stock exchange companies in different countries around the world. 

6 - Watch out for ‘The October Effect.’

Stock investors say October is the most volatile month in the stock market. At first, this information started as a myth. But then, the Wall Street Crash in 1929 happened in October; the same for Black Monday, which occurred on October 19, 1987. 

But aside from those two events, data shows that the data of bear markets ending are highly evident in October. On top of that, it shows that the rate of large swings happening in October is higher than any other month. 

7 - ‘Buying low and selling high’ is a reliable rule of thumb.

When making a financial investment, advisors always give various tips to their investors. Buying low and selling high is a reliable rule of thumb in acquiring stocks. It is why it’s critical to assess stock indices and the potential of small companies to grow before buying one.

Many have earned massive returns in their stock investments because they invested wisely in a company with the most potential for success. One of the best examples is Apple investors in 2009. If you bought a stock worth $1000 in 2009, it would have been $15,000 today, thanks to Apple’s success.

That’s why when acquiring stocks, be discerning in choosing a company to help you grow your money best.

These are just a gist; there is more to learn about the market. 

It can be exciting and intriguing to start investing in the stock market. If you’re new to investing and have no idea about stocks, learning about them is essential. Aside from these seven facts I shared, there is more information that you must learn to make the best of your stock investment.

Written by Bianca Banda