11 Hard-to-Believe Stock Market Facts – Motley Fool

Warren Buffett has quipped that “The stock market is a device for transferring money from the impatient to the patient.” That’s generally true, but if you’re not only patient, but also savvy about how to invest in stocks, you can be among those who profit and build wealth.

Here are 11 things worth knowing about the stock market, some of which can make you a better investor, and a few of which can make you more interesting at parties — whenever parties resume. See how many of the things below surprise you.

Image source: Getty Images.

No. 1: Stocks have been around for a long time

For starters, stocks have been around for longer than you likely think. If you define a stock market as a regulated marketplace where people can buy and sell investments, you can go back to the 11th century, when agricultural debts were traded in France, and the 16th century, when a more sophisticated debt market existed in Belgium. The first publicly traded stock seems to have been that of the Dutch East India Company, which was founded in 1602 and engaged in trade in and between Asia and Europe. Its shares were traded on the Amsterdam Stock Market.

In the U.S., the New York Stock Exchange is the oldest exchange, created when 24 gentlemen gathered under a buttonwood tree in 1792 in the part of New York City that later became Wall Street.

No. 2: “The Dow” isn’t what you probably think it is

We often think of “the Dow” as referring to the U.S. stock market, and it has often served as a proxy for it, but the Dow Jones Industrial Average is actually a stock index made up of just 30 companies. The components change a bit every now and then, and the current roster includes names such as Apple, McDonald’s, Nike, Walmart, and Visa. Interestingly, unlike many other indexes that weight their components by their market capitalization, the Dow is price-weighted, so a stock with a price of $267 will influence the index much more than a $21 stock.

No. 3: One stock was recently trading for $319,571 per share

Speaking of high-priced stocks, would you believe that one particular company has shares that were recently trading for more than $300,000 apiece? The company is Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B), trading at $319,571 for a single Class-A share at the time of this writing. Stocks trading with prices in the four digits are relatively rare, and Berkshire’s shares are in a class by themselves. Note, though, that Berkshire also has much more accessible Class-B shares, that were recently trading near $213 per share.

No. 4: Only 55% of Americans own stocks

It can seem, from news coverage, that most Americans are interested in the stock market, presumably because they have a stake in it. But only 55% do, according to a Gallup survey taken in April. Gallup has asked the question repeatedly, with replies since 1998 ranging between 52% and 67%.

No. 5: There are more mutual funds than you think

If you think there are hundreds of mutual funds to choose from, you’re not exactly wrong, but there are actually thousands. There are more than 6,000 stock funds in the U.S., per the Investment Company Institute, and more than 100,000 funds of all types (stock, bond, ETF, money market, etc.) globally.

No. 6: The stock market tends to recover relatively quickly after crashes

Many investors dread stock market corrections and crashes, but there’s no use hoping they won’t happen — because they will. They will vary in intensity and duration, but on average, the news isn’t too bad. The folks at Capital Group studied stock market performance from 1950 through 2019, and found that pullbacks of 10% or more (often referred to as “correction”) happened about once a year and lasted, on average, about 112 days. That’s about three and a half months. Even recoveries lasting twice as long wouldn’t be so terrible, lasting roughly seven months. Drops of 15% or more happened about once every four years and lasted, on average, about 262 days (roughly eight and a half months), while drops of 20% or more (“crashes”) happen about every six years and last an average of 401 days, or about a year and a month. These are just averages, and anything can happen at any time, but know that the stock market tends to recover from most big drops fairly quickly. Remember, too, that market drops can be wonderful opportunities for long-term investors.

No. 7: The U.S. stock market makes up about 55% of the global market

The U.S. economy may be facing some big challenges these days, given the ongoing pandemic and the job losses and business closures accompanying it, but the U.S. stock market isn’t far off its highs at the time of this writing — and the U.S. stock market makes up a majority of the entire world’s total stock value. Specifically, it makes up about 54.5% of it, per the Credit Suisse Global Investment Returns Yearbook.

Image source: Getty Images.

No. 8: Even pirates have a stock market

Sure, there are stock markets for shares of companies offering various products and services, and bond markets, for debt obligations that investors trade. But did you know that even pirates have had a market, and not so long ago? The Wall Street Journal covered it in 2011, saying: “The world’s first pirate stock exchange was established in 2009 in Harardheere, some 250 miles northeast of Mogadishu, Somalia. Open 24 hours a day, the exchange allows investors to profit from ransoms collected on the high seas, which can approach $10 million for successful attacks against Western commercial vessels.”

No. 9: Many stocks offer more income than bonds

We often imagine that one invests in stocks aiming for stock-price appreciation and in bonds for income, but stocks can offer significant income, too — via dividend payouts. In this period of ultra-low interest rates that we’ve been in for many years, it’s not uncommon to see plenty of dividend-paying stocks offering yields that are higher than many bond rates. Consider that U.S. Treasury bonds recently sported yields of 0.33% (for a five-year maturity) and 1.57% (for a 30-year maturity). Meanwhile, check out some companies’ recent dividend yields, below:

Source: Yahoo! Finance.

By the way, the companies above are just a few of the many “Dividend Aristocrats” out there — companies that have been paying an uninterrupted dividend for at least 25 years.

No. 10: There have been lots of speculative bubbles that burst

It’s easy to assume that stock market bubbles that burst — speculative frenzies of soaring prices that eventually crash to earth — are limited to our modern era and stocks in modern companies. Not so. There have been many such frenzies over the past hundreds of years. In the 1600s, there was a tulip bubble in Holland, and in the 1800s, a bicycle-company frenzy in England. A little digging online will turn up many more examples. There are some great (and occasionally amusing) books on the topic, too, such as Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay and A Short History of Financial Euphoria and The Great Crash 1929 by John Kenneth Galbraith.

No. 11: How to be a successful investor isn’t a secret

Finally, there’s this surprising fact about the stock market: While investing in it successfully may seem like a very complicated and difficult undertaking, that isn’t necessarily the case. You can just invest in index funds, keeping everything simple, and still profitable. Or you can learn from some great books and great investors. Warren Buffett, for example, has given many talks and written many articles and letters offering his insights.

The more you learn about the stock market, the more you may be impressed by how interesting it is. And the savvier you become, the more rapidly your portfolio might grow, as well.