...which gets 'lost' when the stock market crashes or goes down? I know it's registered as a loss / losses in peoples' accounts & on the records, but what happens to all of the actual money that people have deposited / invested into the market? Thanx for any & all answers, comments, thoughts & opinions!!!
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Thanx to everyone for the great, informative answers!!! Sorry I could only choose one best answer!
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Success
Favorite Answer
Most of it is not real money.
ok. You have $1,000.00 and you buy 1000 shares of CAT stock at $1.00 a share.
CAT stock purrs along and a year later your stock is worth $2.00 a share. If you sell it now you get $2,000.00.
But you don't.
Ten years later CAT has acquired BIRD and MOUSE and is now worth $50.00 a share. If you sell your stock you would have $50,000.00.
But you don't.
The next week a new company DOG comes out with a product that makes CAT look stupid. CAT stocks drop to $.99 per share.
Now you sell your stock and you walk away with $999.00.
You did not lose $2,000. You did not lose $50,000.00 that was not actual real money until you took the action to sell your stock.
You lost $1.00. Because you bought something for $1,000.00 and sold it for $999.00.
So when the stock market loses value, the value of the stocks goes down and the potential for that money is lost, not the actual money. When the stock market gains value the value of the stocks goes up and the potential for that money goes up.
tiescore
You own a box, someone offers you $10 for the box. You decide not to take the offer. Three days later you call them and say you'd sell them the box now, but they already bought another box, but offer you $6 for yours.
You lost $4 of value on your box. But there never was any money exchanged to lose for your box.
The stock market works the same way on a massive scale.
Ursugardaddy
$6,200,000,000
Yes, that’s right, it’s six billion two hundred million dollars. A very large sum of money, wouldn’t you say? Now what, you ask, does it represent?
It is roughly how much Warren Buffett’s personal shareholdings in his Berkshire Hathaway, Inc. declined in value between July 17 and August 31, 1998. And now for the six billion dollar question. During those forty-five days, how much money did Warren Buffett lose in the stock market?
The answer is, of course, that he didn’t lose anything. Why? That’s simple: he didn’t sell.
rarguile
Some good answers - money here is just a measurement of value - not a medium of exchange - but you bring up a good point - when, say, auto workers go on strike - the company is reported in the media as losing "billions of dollars worth of production". Or when it snows and shuts down an airport and flights are cancelled - again, we hear that "airlines have lost hundreds of millions of dollars revenue". Or that a flu bug costs the economy - costing the economy" 7 billion dollars in lost productivity"?
Measuring potential losses of production, snowstorms, or flu epidemics in dollars is a silly exercise but one you see every day. "Two hundred billion dollars of value was lost today as the Dow Jones Index went down five hundred points". Nothing was lost except the paper valuation is lower today because the future prospects of the economy are worse.
Anonymous
You misunderstand. It's not "cash money." It's just a valuation placed on the securities (stocks). If your house has a market value of $250,000 and then there's a market decline that takes it's current value down to $200,000, you don't have $50,000 "vanish" from your bank account. It's a "paper loss."