Financial Markets: 5 Things You Might Not Know About Them
A financial market is one of the fascinating places for those who love to hear the jingle of money. Many people have tried to decrypt and unravel the way the stock market works, predict when it will crash or see an upsurge, and measure its volatility and unpredictability. That is why some of them have lost big time in the stock market. But, those who could understand the language of financial markets have ended up raking in the moolah. See Rakesh Jhunjhunwala and Warren Buffet. They predicted correctly and earned millions or rather billions.
So today, to pep up your mood, we will pen down some little-known or unknown facts about the financial markets.
5 things to know about the financial market
The Rule of 72
It is one of the oldest investment rules, invented by Luca Pacioli way back in the 15th century. The inexperienced investors often inquired about the investment period for doubling the investment amount. And, little did they know that it can be easily calculated with the help of the Rule of 72. This rule will help you determine the period in which an investment can become double at a fixed yearly interest rate. The formula for the simple rule is also given here: T = 72/R, where T is the period and R is the interest rate.
Try it for yourself. Assume that your investment amount is ₹5,00,000 at an 8% rate of interest. Then, the period for doubling according to the Rule of 72 would be 72/8 = 9 years. So, it would take around nine years for this amount to become ₹10,00,000. It is not a precise formula, but it is good for small amounts and low-interest rates.
Our very own BSE is the largest and the oldest stock exchange in Asia
There was a Gujarati businessman, Premchand Roychand, from Surat, who founded Bombay Stock Exchange (BSE) in 1875. Even though Mr Roychand earned most of his income from the stockbroking business, he was also touted as the Cotton King and the Bullion King. He also earned the moniker of the Big Bull long before Harshad Mehta. It was due to his single-handed efforts that BSE issued the first native shares in the country. A stock brokers association was also formed for the first time in India.
BSE is the oldest exchange in Asia and the largest because 5000 companies are listed on it. Apart from BSE, there are 23 other stock exchanges in India.
One share of Berkshire Hathaway costs you ₹ 2 crore plus
Berkshire Hathaway Inc. is one of the biggest (probably third) US MNCs, with its headquarters in Nebraska. The public company earns the largest revenue globally, as it earns most of its profit from its holdings. The most popular companies that Berkshire Hathaway wholly or partially owns are Duracell, Kraft Heinz, Coca-Cola and Apple. Warren Buffett, the ace investor, is the chairman and another famous investor Charlie Munger serves as the vice-chairman of Berkshire Hathaway.
TCS and Reliance Industries have more market value than Karachi Stock Exchange
This seems to be a shocking fact, but it is entirely true. Large Indian companies such as TCS (Tata Consultancy Services) and RIL (Reliance Industries Limited) individually have a market capitalisation of more than Karachi Stock Exchange (KSE), which was established on September 18, 1947.
Further, KSE has a total market capitalisation of $40 billion. It began with five companies and a market cap of $260,000. The market cap of TCS is over $12,000 trillion. RIL has a market cap of more than $17 trillion. This shows how economically powerful India is in the Asian region.
The joint market cap value of FAANG companies is around 25%
S&P or Standard and Poor’s are one of the most popular index creators all around the world. As per its surveys, the largest tech companies in the world, i.e. Facebook, Amazon, Apple, Microsoft and Google, have a combined market cap of $6 trillion. This is the largest capital concentration in the world and also in history. It also shows how valuable tech and data are in today’s world.
If we talk about market caps only, then Netflix and the Mexican stock exchanges are almost equal in net worth. Also, Facebook’s market cap is around 1.5 times IBEX in Spain. So, if you want to invest, then go for global tech companies which are showing spectacular YoY returns.
To sum up, if you are intrigued by the financial markets and how they operate, hopefully, these five pointers are a great starting place. However, an MBA in Fintech is a good point to start if you are planning a career. Here, you will get a chance to learn about the fundamentals of finance, which will help you decode the market better. In this regard, you can consider enrolling in MBA in Fintech from KL University in partnership with Imarticus Learning.