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
That money doesn’t go anywhere. You didn’t give the money to ABC company, you gave it to an investor selling a share of ABC co. They got their $100 and did whatever they wanted to do with it. If you can only sell for $90, it simply means people would only choose to pay that amount for it because they believe it’s worth that amount now.
It’s also worth noting that 99.9% of the time you are not buying stock from the company the stock is for. You are buying it from another person, or more likely, from another unaffiliated company that specializes in trading.
Think of it this way. You go buy an apple for a dollar today, the store has your dollar and you have an apple. Today the apple is worth $1. Tomorrow its price is reduced to $.90, your dollar didn’t go anywhere, the store still has it but the market value (price) of your apple is only worth $.90 so you lost $.10 of value overall.
It went to the person you bought the stock from. Stock has no defined value, all $100 went to the person you bought it from. If you accept $90, that’s a separate transaction. If everyone holds above $100, you would never lose money.
The stock when you purchased it is like a ticket for an event, over time perhaps the value people would pay to go to the event goes up or down due to demand or perhaps up if there’s the chance something unique happens in a future show. The ticket, whether the current price has gone up or down still admits you to the event, it’s only if you were to resell the ticket to someone else would you see a gain or loss.
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).
It didn’t “go” anywhere. You gave $100 to one individual, and got $90 from another. Same as if you bought a bicycle for $50 and sold it for $45.
[I love this chart](https://www.google.com/amp/s/www.marketwatch.com/amp/story/this-is-how-much-money-exists-in-the-entire-world-in-one-chart-2015-12-18)
Scroll down to derivatives.
Shortest answer; It doesn’t go anywhere because it does not exist.
Money is a fiction. Stocks are a fiction of a fiction. Since money doesn’t exist, the value of a stock can change arbitrarily without any violation of any laws, of nature or otherwise.
If you don’t own something but you need one of that something, and then you buy it for $10, your willingness to pay for it again basically turns your desire to buy it again to $0, i.e. someone would have to pay you some amount of money to take it off their hands. If there’s something you don’t want and aren’t willing to pay any amount of money for (i.e. you value that thing at $0), and then an event happens in your life that causes you to think you need it, the amount of money you’re willing to spend just went from $0 to a hypothetical $10.
So the increase/decreases in prices stems from you specifically and from everyone else in general’s thoughts and feelings about what’s worth working for to obtain. People’s desires change based on events in their life (some are constant, like hunger) and their knowledge of the resources that could mitigate the bad things that they believe could stem from those events causes them to change how they once valued those resources. This shifts “the market” (or causes price changes) and those shifts may negatively impact certain companies that provided once-desirable goods, now that people no longer believe their product is worth the cost, so the price drops in an attempt to keep people buying.
All that is to say that price is tied to value, and value is exactly that: it’s the “price” you put on a resource to determine whether you are willing to spend money to get it. When people’s desires change, that’s their valuation process changing, which affects prices. The change could be due to anything, but occasionally, societal-wide impacts can cause many people to seek the same thing, and if that thing is scarce, people are willing to pay more for it, causing the price to go up on that thing, and because people don’t have infinite money, it causes the price to go down on other things. So if there’s a food shortage, video game stonk prices may drop because people aren’t willing to pay money for video games because food is more important, so people investing in the video game company are less willing to bet that buying the stock will make them money. It’s more intuitive to think of it as the value has gone down, not that the stock has lost money. **The price of the stock is just what people are willing to pay for it, not how many dollars it *is*.**
*edit: wording and grammar. Also, to your example, if you only have $190 and really want that $100 stock, after buying it, you only have $90. You’d totally buy it again if it was $90 because you think it’s going up to $200. If enough people no longer feel the stock was worth $100 to them, the stock price may drop to $90 and then you could buy it for that price. It goes back to not only what things are worth paying for, but also how much money you have to buy the things you really want.*
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