Example: if I bought $100 share of ABC company and tomorrow it’s $90, I get that I would incur a $10 loss if I tried to sell it, but I don’t understand what happens to the $10 difference ABC company still has from me.
Edit: okay so in this scenario:
1. i bought the share from the issuer
2. there is a downturn and the s&p index is down by 3,000 points
The first people to hear that the market is about to drop went ahead and cashed out their $100 share back from abc, however I was not lucky and my share is now worth $90. Wouldn’t ABC company have my $10? All the companies listed on the index, they get to keep the difference of the value of what the share was yesterday vs. today. Sure, the equity part of ABC company got smaller, but they still keep the $10 difference should everyone come back and cash out their shares?
In: Other
Value is such a slippery thing.
It’s important to remember that money =/= value even if they are tightly bound together. /u/xaradevir explained it excellently, so I will try to avoid rehashing it.
One thing he didn’t mention is that money itself has value that can go up and down, especially how the economic system are set up today. So if the ABC company stays at the same value, but people start thinking that those $$$ are more valuable, then the price of the stock may drop to $90, but the value stayed the same. Of course, the person who sold for $100 would be happy, because the value of his money went up.
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