Money itself isn’t lost or gained its simple transferred ?
That was a quote from the movie "Wall Street" from the 80′s.
But it’s got me wondering lately.
Say a person looses a big chunk of their IRA, 401K, etc. due to the recently volatility stock market.
Where does that money really go?
The buyer of your assets is buying them in hopes of getting a bargain and it rising in the long term.
So even they only get a small portion.
Do I have this right? Does the money just "disappear"?
Comments
unless you are actually involved in a transaction, the money is just appearing/disappearing. we take a million dollars worth of transactions, and say that those are the terms by which a trillion dollars of assets are valued. if that changes the value of that trillion dollars by a few billion dollars, that few billion dollars doesn’t actually go to anyone.
the quote from wall street is figurative, not literal.
July 21st, 2010 at 3:05 pm
The money isn’t really there until it is bought or sold. It’s "on paper" until then. Say you bought 100 shares of a stock at $5.00. You spent $500. The next month, it goes up to $6.00. You can’t spent that $100, it isn’t real to you unless you sell it. It’s an unrealized gain. If the stock goes down to $4.00, you haven’t lost it, either. It’s a $100 loss on paper, an unrealized loss. You still own 100 shares. You can’t spend it, you don’t pay taxes on it, any profit or loss is not really there until someone else buys it.
The stock price is set when someone wants to sell some shares, and finds someone else to buy it. Whatever they settle on is the current price of the stock. Then everyone else who owns the stock reprices their shares with that price. That’s why it’s not a real price. If many more people want to sell than want to buy, the buyers get to name a lower price. If huge numbers want to sell, and only a few want to buy, the price comes waaaay down. But until you sell — you really haven’t lost any real money. The money doesn’t go anywhere, it wasn’t really there to begin with.