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
ELI5: it only has a written value. It’s not backed up by real funds.
Its like having the super rare Pokémon trading card. Everybody wants it to act cool, so people are paying good money for it. Then Pokémon gets uncool. Nobody wants it any more, so hypothetical selling prices are going down. But it’s not like you can pay your rent with that money that people would be paying.
The value only becomes real money once the trading transaction happens. Then it’s hard cash again and you can go and pay stuff with it.
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