Interesting Facts About The Stock Market

The stock market is a place where several investors try to grow their money. They often develop unique trading strategies and use various analysis tools to decode the market’s unpredictability and mood. In this article, we will read some lesser-known and interesting facts about the stock market.
 

You’ll learn about the Rule of 72, which helps estimate how long it will take for an investment to double. We will study the importance of entering the correct price and quantity when trading stocks to avoid costly mistakes.
 

Moreover, we will explore the history of the Bombay Stock Exchange—the oldest in Asia, and see why Berkshire Hathaway is the world’s most expensive stock. You will even learn about pirate exchanges in Somalia and the correct meanings behind bull and bear markets.
 

Lastly, we will see how large Indian companies like TCS and Reliance Industries have a strong presence on a global scale. Let’s begin.

The Rule of 72 is a technique. It helps investors estimate the number of years it will take for an investment to double at a fixed annual rate of return. To use this rule, you simply divide 72 by the annual interest rate. The result gives you an approximate number of years needed for the investment to grow to twice its original amount.
 

For example, say you invest Rs 5,00,000 at an annual return rate of 8%. According to the Rule of 72, it will take approximately 9 years (72/8) for your Rs 5,00,000 investment to double.
 

Now, coming to its accuracy, the Rule of 72 is not perfectly accurate but provides a reasonably close estimate. This especially holds for lower rates of return. You can think of this technique as a quick mental math shortcut for understanding how your investments might grow over time.
 

For better clarity, the table below compares the estimated doubling time using the Rule of 72 and the actual doubling time for various rates of return:

When buying or selling stocks (usually referred to as "scrips"), it is crucial to accurately enter the:

• Quantity: This refers to the number of shares you want to buy or sell.
• Price: This is the amount you are willing to pay per share when buying or the amount you want to receive per share when selling.
  
  

Always remember that making an error in these details can lead to significant financial losses. An interesting fact about the stock market is that most investors make one common mistake of interchanging price and quantity, where they mistakenly enter the “price” in the “quantity” field and the “quantity” in the “price field”.
 

For example:

• Say you intend to buy 100 shares at Rs. 50 each.
• Instead, you enter 50 shares at Rs. 100 each.
  
  

Now, this mistake could result in a much larger or smaller transaction than intended and lead to unexpected financial outcomes.
 

Furthermore, it must be noted that the stock exchanges in India, such as the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange), operate at incredibly high speeds. They process orders in microseconds. Due to this rapid execution, once an order is placed, it cannot be cancelled or modified as the trade happens almost instantly.

The Bombay Stock Exchange (BSE) holds the distinction of being the oldest stock exchange in Asia. It was founded by a prominent businessman named Premchand Roychand in the 19th century. Mr. Roychand was a highly successful stockbroker and earned nicknames such as the Cotton King, the Bullion King, and the Big Bull due to his success in various markets.
 

The original name of BSE was “Native Share and Stock Brokers Association”. It is the oldest stock exchange in Asia and has over 5,000 companies listed. This even makes it the exchange with the highest number of listed companies in the world.
 

An interesting fact about the stock market is that before 1995, all trading was done physically. In other words, actual paper certificates were used to buy and sell shares. On the other hand, post-1995, the exchange began the process of dematerialisation. This transitioned trading from physical paper certificates to electronic records.
 

Be aware that besides BSE, India has more than 23 other stock exchanges. However, BSE remains one of the most prominent.

In the world, “Berkshire Hathaway” holds the title of being the most expensive stock in the world. One share of Berkshire Hathaway costs over Rs. 5.50 crore (approximately $657,180 as of July 28, 2024) and it even became the first company to cross $100,000 on October 23, 2006.
 

The company is an American multinational conglomerate headquartered in Nebraska, United States. It is the third-largest public company in the world and the largest financial services company by revenue. The company is chaired by Warren Buffett, a renowned investor, with Charlie Munger serving as vice-chairman.
 

Now, you must be wondering why this stock is so expensive. Let’s check out some major reasons for its high stock price:

• No stock splits
  • Berkshire Hathaway has never split its stock.
  • For the unaware, a stock split is when a company divides its existing shares into multiple shares to lower the price per share.
  • Such a split makes its stock more affordable for investors.
  • By not splitting the stock, the price of each share of Berkshire Hathaway has continued to rise over the years.
• Dividend policy
  • The company rarely pays dividends.
  • Dividends are payments made to shareholders from a company's profits.
  • By not paying dividends, Berkshire Hathaway retains more earnings.
  • Such a no-dividend policy maintained over several years has contributed to an increase in its stock price.
     

Do you know how foreign investors trade in the Indian stock market without physically coming to India?
 

Learn about SGX Nifty, an off-shore derivatives instrument and check how it enables foreigners to take a chance on the performance of the Indian stock market.

A very rare and interesting fact about the stock market is that in addition to traditional stock and commodity exchanges, there is a unique and unconventional exchange known as the "pirate exchange." The world’s first pirate stock exchange was established in 2009 in Harardheere, Somalia. This exchange allows investors to profit from the ransoms collected by pirates. Through this exchange, people can invest in pirate activities and share in the profits from successful ransoms.
 

The pirate exchange operates 24/7 and is always open for trading. Although there are no official reports on the exact operations of this exchange, some sources suggest that over 70 entities (pirate groups or related ventures) are listed on it.

In the stock market, the terms "bull market" and "bear market" are frequently used to describe market trends and investor sentiment. Market participants who understand these terms can better gauge market conditions and spot the prevailing trends. For greater clarity, let’s study the table below:

IPOs are one of the most preferred ways to invest in companies debuting on the stock market. However, do you know when these are listed on the listing day?
 

Learn about IPO listing time today and check out the various timings of the pre-trading session and regular trading

Another interesting fact about the stock market is that Indian companies like Tata Consultancy Services (TCS) and Reliance Industries Ltd (RIL) are remarkably large. As per some studies, their market capitalisation (market cap) surpasses the entire market cap of the Karachi Stock Exchange (KSE), which has a total market cap of 65 billion USD. TCS alone has a market cap of Rs. 15,87,562 crore (as of July 28, 2024) that exceeds this amount.
 

For the unaware, the KSE was established on September 18, 1947. It started with five companies (KSE50) and a total market cap of 260,000 USD. Over time, the KSE has grown and helped in capital formation for a wide range of participants. However, its total market cap remains lower than that of some individual Indian companies like TCS.
 

This comparison clearly shows the immense growth and market presence of Indian companies on a global scale. Also, investors must realise the potential of the stock market to create significant wealth, provided they invest with knowledge and remain patient.
 

Tick size is the smallest fluctuation in the price of an asset. Do you know how traders use it to analyse market trends?
 

Understand tick size in detail and learn how to predict an asset’s price changes in advance.