The markets did a nosedive and exchange traded funds (ETFs) plunged along with it. But where did all that money go?
What we’ve seen in the markets lately is not so much lost money, but rather, lost value. It’s not as though mounds of cash were there one day, but can’t be located the next.
Investopedia explains that regardless of whether the market is in bull (appreciating) or bear (depreciating) mode, supply and demand drive the price of stocks, and fluctuations in stock prices determine whether you make money or lose it.
People hate to lose. Some can stomach it better than others, but it’s a point of investing that causes many investors to hang on for far longer than they ought to. We hear from investors all the time who say things like, “I can’t sell, because then I’ll take the loss. If I haven’t realized the loss, it’s not really a loss.”
But you’ve lost whether you’ve sold or not. Hanging on has you losing on two fronts: you’re losing in your current position, and you’re losing time in which you could be making money in other positions.