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?
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Lots of great explanations here, but I’d add the analogy of house prices. If I want to take out a loan on my house the bank needs to know its “value”, which is what they think they’d get if they were to foreclose on the loan and sell the house.
(And in reality, no one knows the “value” of the house until it is actually sold. It’s estimated by looking at comparable houses that have recently sold, but this is a guessing game.)
The fact that my house may have gone up by 50% in value since I bought it doesn’t mean I’ve got 50% more money than I paid for the house. Just that I could maybe get that much if I were to sell at the time of the appraisal (and if the appraisal was accurate).
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