If you lose money in the stock market...?

Question

Who takes your money when your stocks go down? It can't be the people who's company increased because it isn't like if one stock goes down a point, another goes up, so who gets the money???

Answer 1

I am afraid W.S C. is exactly correct.

There are two types of losses(and gains) in the market.

One is the stock changes in price from purchase price.  The difference  if you do not sell is an unrealized gain(or loss).  Your net worth has changed.  Think about the Bearn Stearns executives whose stock holding went from $30 to $5 before the buy-out. Those who had borrowed based on the value of their holdings were in dire straits indeed. These changes are often referred to paper gains(or losses) Paper cuts can be fatal.

The second of course is the difference in value between purchase and sale.. You can turn $10000 into $100,000 or vice versa.  

Perhaps an analogy would be buying a sports car.  Most vehicle including sports cars do depreciate in value.  However sometimes you buy a classic that you can sell to a collector for more than you paid for it.  The original vendor has made some money but is indifferent financially to what happens to the value after that.  So it is with stock sellers.

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Answer 2

your lost is someone else's gain remember that.

if you sell when the market is down, someone bought the stock you sold and they found a bargain.

and when they market is good and you want to get back in guess who is selling you the stock? the person who took the bargain from you.

always be on the right side of the cycle.  for example, today was a good day to BUY, not SELL

Answer 3

When the market goes down, NO ONE takes you money.

In order for money to change hands in the market some one actually has to buy and someone has to sell.

Other than the buy/sell, money does not change hands, therefore there is no money movement

If you buy, you pay the money to the seller,

if you sell you receive money from the buyer,

If you sell at a lower price than you paid, you lost money,

but the buyer didn't make any money

Answer 4

It is no different than anything else you buy.  If you pay $10 because you think it is going to be worth $15, then you sell in a year at $5, someone else just bought at $5 because they think it will be worth more later.

Just like buying a car, house, anything else.  You buy it for a price, and you sell it later for another.

Answer 5

Each transaction have two parties.

ones gain is balanced by others loss.

Answer 6

the person you bought the stock from. They sold it to you takign a risk they might lose out on profit. But what they sold you was worth what they sold it to you for when they sold it.

Answer 7

Although I pretty much agree with the previous answers, I don't think they explained the situation very well.

Some types of investments are known a "zero sum" investments because for every dollar one person makes another person loses a dollar. Poker games are "zero sum" because every dollar one person makes is a dollar someone else lost. Similarly, futures and options are zero sum investments because for every long position there is a short position.

Stocks are not zero sum investments. If the price of the stock goes up, all the stock holders make money. If the price of the stock goes down, all the stock holders lose money. When the price of a stock changes, the value of the company (as determined by market participants) changes.

If you own shares of stock, you own an asset. Similarly, if you own an oil well you own an asset. If the value of an asset you own goes up, you make money; if the value of an asset you own goes down, you lose money. No one else makes or loses money because you are the sole owner of that asset. It does not matter if the asset is a stock or an oil well. The money you made or lost does not go to anyone else. Wealth is created or destroyed, not transfered from one to another.

I hope this makes the answer clearer.