Lost 90k in past month- where did it go?

[Kielbasi]

I've lost money in the market before, but I took a pretty big hit in recent weeks on my 401k and brokerage account.

I certainly ain't whining about it, but if I lost 90k, others I'm sure have lost more, where did all that money go to?

[buffalo]

Originally Posted by Kielbasi

I've lost money in the market before, but I took a pretty big hit in recent weeks on my 401k and brokerage account.

I certainly ain't whining about it, but if I lost 90k, others I'm sure have lost more, where did all that money go to?

It didn't go anywhere. It was never there. The market simply tries to guess what it will be worth in the future.

[HouseArrest]

Originally Posted by buffalo

It didn't go anywhere. It was never there. The market simply tries to guess what it will be worth in the future.

But then when you cash it in, where does it come from?

[SVP]

Originally Posted by HouseArrest

But then when you cash it in, where does it come from?

All the other speculators who have cash reserves and are buying in hopes it goes up (or down if they are shorting it). The money is always there. Until the stock is sold it remains unrealised capital gains (or losses). The market is a paper chase. My own stock portfolio "lost" $40k of paper value in the last two months. If the companies are solvent and the market rises again, I will have lost nothing in the long run. If I panic or am in a situation where I MUST sell, then I am in a bad spot.

Spread out investments, have money in different Credit Unions (they operate significantly differently than banks) and keep some cold hard cash on reserve. If you can afford it, buy actual gold (coins). My father who grew up in the Great Depression always had a few gold $20 coins he kept at hand for emergencies (worth about $1500 at today's market prices)

[AHapka]

Originally Posted by HouseArrest

But then when you cash it in, where does it come from?

It comes from someone with real money buying on the market when you sell it. Up until then, any gain (or loss) was just on paper.

Think of it as buying a house for 100,000. Last year it was worth 200,000. This year it's worth 150,000. If you say you "lost" 50,000 from the highest point, the money didn't go anywhere because it never existed to begin with. The only money that exists is the 100,000 you put into it. The value of your house at any time is only an estimate of what it might be worth should you sell it.

Only when you sell it, and someone gives you a check does the gain (or loss) actually exist. If you sell the house for 160,000 that means you gained 60,000 when you sold the house. You did not lose 40,000 from the high of 200,000 because the 200,000 never existed to begin with.

However, as a side note, the 40,000 difference is what is referred to as "opportunity cost." I.E. Had you sold the house when you could have gotten a buyer for 200,000 then you would have had 40,000 more.

So you have not really lost 90K unless you were to sell today. Then you would realize the 90K loss. You have no real gain or loss until you sell.

[mike14620]

Stock values represent the perceived value of a company by investors and speculators. Just as any privately held business is valued when being sold, a publicly traded company has value as well. That value is linked to the perceived profits that the company can expect in the future (to be payed to shareholders as a dividend), as well as cash or physical assets (a company could be bought out, and its assets could be sold off piece-meal in a liquidation sale). In some cases, the price of a publicly traded company is somewhat higher than it would be if privately held because of the liquidity - it is easier to buy and sell stakes in a public company compared to a private one.

So nobody ran off with the money you, me, or others have lost. Instead, that wealth essentially disappeared, as companies find it more difficult to make a profit when the economy contracts, and there are fewer buyers to purchase a company (whether they are taking a stake in the public company through stock or going for an all-out leveraged buyout).

The economy will recover eventually. After the crash in 1987, it took 24 months for the Dow to get back to previous highs. The decline in recent weeks, or really over the last year, has been a bit larger than '87, but not yet markedly so. I am waiting for the market to stabilize before I commit another dime to the market. I've closed out a number of positions for considerable losses recently.

I'm mostly out of the market until I see the $VIX under 45 (which is still incredibly high). The volatility in this market has been unreal.

[edjco]

The simple reply is: "Did anyone knock on your door demanding the money?" If not, you didn't lose a cent. You did lose money on paper, but you will not lose anything (or gain anything) until you sell it.

[mja2]

It went into hedge fund naked short sellers pockets who protected by the SEC have destroyed trust in the stock market and banking establishment, liars and cheats all, that's where, and it was real money. Your 401k fund took money you saved and bought shares and hyperinflated prices, it was real money and still is, it just changed hands to the scum who infest Wall Street. It's not a loss until you sell but it might take 10 years to get even, if you would have sold 6 months ago you could have been sitting in cash and bought 3 times the amount you had. Buy and hold is for morons and losers, time to wise up to the swindle. The money lost in the dot bomb bust was real losses too.

[jc-servant]

To me, investing in stocks is similar to gambling, if you cannot afford to lose it then you should not be placing it on horses or stocks. There are ways to study and try to beat the odds in both arenas, but there is always a risk and no fool-proof guarantees.

As has already been said, if some investor does not need to cash out right now then they will likely make much of their paper losses back when the market improves. However, anyone who was close to retirement or already retired should have had all or most of their money in a much safer place than stocks.

I've seen a lot of people in the news blaming greedy speculators, Wall Street executives, etc but I have not heard anyone taking some of the blame for their losses. People took risks with their money and guessed incorrectly what the market would do. It is a proven fact that gambling and stocks don't always make a person money. I would love to hear more Americans start taking more of their decisions and actions instead of looking for someone else to blame when things go badly. This goes for all parts of our lives. I certainly heard people taking the credit for their "brilliant" decisions when they were making money in the market.

[jrabs]

[quote=jc-servant;4358019]To me, investing in stocks is similar to gambling, if you cannot afford to lose it then you should not be placing it on horses or stocks. There are ways to study and try to beat the odds in both arenas, but there is always a risk and no fool-proof guarantees.

However, anyone who was close to retirement or already retired should have had all or most of their money in a much safer place than stocks.

quote]

Your post is not quite "on the money."
This is more encompassing then playing the stock market. It is impacting 401k accounts. I would not say that a 401K is a silly and frivolous gamble.

And it is tragic that elderly people who have socked money away in a 401K are seeing it vanish. Even the more conservative bond markets are being eroded.

[jc-servant]

Believe me that I understand about the 401K shrinking, but at least the people with whom I've spoken made choices of investments even within a 401K. I don't mean to imply that people who lost money were all reckless because that would apply to me also, but everyone was taking a chance that profits would result instead of losses.

For instance, at my old job before the downward slide began I chose 100% stocks for my 401K because I was so far away from retirement. I had money in domestic and international funds. The materials made it clear that by picking only stock funds I had more risk than a mixed set of investment choices. I knew that I was "gambling" that my funds would show a profit rather than a loss over the many years before I would need to retire.

My more recent contributions at my new job have all been for very conservative choices which in fact are still showing a small net gain. I knew that I would not have the opportunity with my choices to earn huge profits, but I knew that I was safe from incurring a huge loss if the market continued in the direction that I feared.

I still think of most investments as gambling because it involves risk-taking even after a person does their best research. I do my research and make my best guess for investing just as my father does when he bets on a horse. (However, having grown up working in the racing business and following it for years with a lot of research as a hobby, he probably has a better understanding of horses, trainers and race conditions than I ever will of stocks and bonds. He gets a better return for his "investment" also which is sometimes annoying.)

[mh2007]

The money did not go anywhere. You paid $X for stocks or mutual funds. Your basis is the total amount paid including any commissions.

Just because the value of the stocks or funds has declined doesn't mean you have lost. You will only lose if you sell at the prevailing, lower price.

If you don't sell, you don't have a loss. So wait for the market to go up again. It surely will - eventually. Investing is a long term proposition. The rule of thumb is don't invest in the stock market if you will need that money within the next 5 years. The reason is, at times like this (2008) the market is way down. If you need the funds you have in the market in 2008, or 2009, 2010, etc. you may incur losses. But if you hold the stocks 5 years or more, the likelihood of losing is far less. If you hold for 10+ years, the likelihood of losing is remote.

A man named Ray Lucia wrote 2 books. The first was Buckets of Money. The second was Ready, Set, Retire. He explains how to allocate your money in terms of sums you will need back in 1 year or less, 7 to 10 years, and > 15 years. The funds you put in the stock market are those you won't need for 10 years or more.

The experience of 2008 shows precisely why you need to invest in stocks for the long haul, not in the short run.

And one last point. Dollar cost average when investing. That means putting a fixed amount of money into the market at regular intervals over time (monthly, quarterly, yearly, etc.) That way, you take advantage of cheaper prices when the market dips, and you gradually scale in as prices rise.
That also eliminates the emotional stress of putting a large chunk of money into the market, only to feel violated if the market goes down for a year or two.

Just you wait. That $90k of value decline you witnessed this past month will eventually turn around. Faith is a challenge until you have success.

[roanoker]

It went to the same place my $182 k went during the month. Only mine was from my IRA, and as a retiree that is our only income. We're currently praying just for survival, as we are both in our mid-seventies. I take comfort in what the pope recently said about counting too much on material things. I think he's right.

[eucharisteo]

Originally Posted by roanoker

It went to the same place my $182 k went during the month. Only mine was from my IRA, and as a retiree that is our only income. We're currently praying just for survival, as we are both in our mid-seventies. I take comfort in what the pope recently said about counting too much on material things. I think he's right.

This is why I plann on working until I die. I'm no good retired and would probably die trying to retire anyway. My father-in-law worked until he couldn't. He was 72 when I married my wife. He died when he was almost 89. My mother in law is now about 83 and lives off S.S. income. So in my view, you are blessed and far too young to retire. To each his own I guess. No judgement just conversation.