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Additional Details
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punkskateboarder13 | Stock exchange question... Stocks plunge - where does the money go ? |
Stocks still go down and down and down...
Someone has to lose money... yeah MONEY - what is that money? It can't be virtual because people buy and sell stocks... And when stocks plunge, where does the money go? It cannot evaporate, right !? |
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wartz
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It goes nowhere. The value of the same stock goes down. It is just like an after Christmas sale when you can buy wrapping paper at half price. The paper is no different than it was the day before, it just costs less. |
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Jay
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This is very simplified, but I think it'll answer your question.
When someone sells something, like a share of stock, they offer it at a particular price. If there is someone willing to pay that price, a deal is made. If there is no one willing to pay that price, the seller can either decide to hold (not sell) or lower their price.
On the other hand, if there are many willing buyers, a seller can make more money by raising the price.
So, what's happened in the stock market (in a dramatic way) over the last couple of weeks are sellers willing to sell their stock at lower and lower prices. Conversely, buyers are unwilling to pay the previous higher prices. Because sellers want to get rid of their stock, they are willing to sell it lower... perhaps even at a loss.
To make this clear, think of this as something else... like iPods.
Suppose I buy an iPod for $200. A week later, there's news that iPods cause cancer. At this point, no one will pay me $200 for my iPod. However, there are some folks out there that are willing to pay me $100 for the iPod. Because I'm eager to get rid of my iPod before there are no more $100 buyers, I give in.
I lost $100. That's where it went. |
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MikeB_
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Let's say you buy yourself a brand new $25000 car. As soon as you sign the papers and drive away, your car loses $2500 to $3000. That money didn't evaporate. It is simply what someone else will pay for your car in it's current state (ie Used).
A stock like AIG was worth $40 one day and $2 the next. $2 was what people were willing to pay for the current state of the company. The value evaporated, not the money. |
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Paul in San Diego
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It literally disappears into thin air.
Let's say you buy a box of apples for $10. And, you let that box of apples sit and rot. Your apples are now not worth anything and you lost your $10. Did someone else get the $10 you lost? No, it just rotted away with those apples.
So, let's say you buy a stock for $100. But, the company is falling on hard times and can't make money anymore. It goes bankrupt and your stock is now worthless. Where did that $100 go? Nowhere. It just disappeared like a box of rotting apples. |
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Kevin R
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In a way, it does evaporate. if you bought 1,000 shares of a stock at $10, and the stock falls to $7, your stock is worth $3,000 less than you paid. That $3,000 just evaporated. That loss is deductible, if taken. Also you don't really lose until you close a position, long or short. |
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963
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Jay had a good answer but in this market there's one more element to add. When the market is trending down there are a group of investors called short sellers that make money by putting in "sell" orders. This causes the price to go down even further. Combine that with bad news and panic selling, these guys rake in the cash in times like these.
So in Jay's example, short sellers would have a ton of sell orders in the minute a rumor of "Ipod causes cancer" came out. Then the feeding frenzy would begin.
The answer you're looking for is twofold. The first is that the price has gone down and the seller has taken a loss because he bought higher. The second is that the short seller's absorb MUCH of that difference because just because you took a loss, they had a hand in the price going down much lower than it would've naturally.
The stock market has gone down 40% while the real estate market has only dropped 20%. There are no short sellers in housing. |
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MVD34
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The short answer is that it was never there to begin with.
Only the people who buy and sell on a particular day actually gain or loose money, but everyone/anyone who owns the same stocks can "pretend" they also sold on that day and have cash instead of stock.
Another way to look at it is to look at bunch of people who live in similar looking houses in the same neighborhood. If one neighbor sells his house for $200,000, all the other people (who did not sell their houses) will think "hey, my house is worth $200,000.") Six months later when a second neighbor sells his house for $150,000, all the remaining people are going to go running screaming about "loosing" $50,000...when in fact, they have actually lost nothing.
Relative value is just that -- relative. It is only "real" if you actually buy and sell (or are forced to...as in bankruptcy or foreclosure).
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ragnarkar
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Well, I'd clarify the cause and effect first:
Stocks go down in price because there are more sellers than buyers. Stocks will keep going down in price until someone is willing to buy at that price. Your broker will arrange these transactions with other market participants whenever you choose to buy or sell stocks.
Sometimes, nobody wants a particular stock anymore.. in that case, its price could theoretically drop to 0 (as it did with Lehman Brothers recently.)
Let's say you bought a stock at $100 and now it's value's at $50 and you decide to sell it (may or may not be the best choice at the moment.) The guy who sold you the stock gained his $100 and the guy who bought your stock paid his $50, thus giving you a loss of ($50). |
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Eric, RI
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Stocks have value because they are expected to pay dividends from their profits or repurchase the stock.
Also the shareholders elect the management.
Less people want to buy the stock when the corporation is not making profits. |
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sam
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hi guys,
1.why do companies sell shares or stocks, why do they put their companies or its share on the list ?
2. and for example: can i buy a company´s share which is not listed (which is not on the selling list ) |
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