As an investor, where does your money go in the event of a Stock Market crash?

[J0E]

The recent stock market declines have made me wonder.



For example let's say you have $100,000 in cash you want to invest.

Then someone gives you a stock tip that Nortel trading at $100 a share is a good investment.

So you put all of your savings into Nortel.

But over the course of a year, Nortel stock plummets to $1 a share.

Your stock is practically worthless and you've 'lost' at least $99,000 of your initial investment.

Question is, where did your hard earned money go?

Unlike your investment, it couldn't have just evaporated of disappeared. Somebody got a hold of it once it left your bank account.



Admittedly, I'm not financially savy and perhaps this question is naive, but WHERE does real money go when a market crashes? Where does it end up?



Did your broker get it? The investment house? The Banks? Nortel?

Or was it divided amongst such parties?



Like to hear some of your replies. Discuss.

[cc]

See MB for good answers to the same question there

[Anonymous]

The recent stock market declines have made me wonder.



For example let's say you have $100,000 in cash you want to invest.

Then someone gives you a stock tip that Nortel trading at $100 a share is a good investment.

So you put all of your savings into Nortel.

But over the course of a year, Nortel stock plummets to $1 a share.

Your stock is practically worthless and you've 'lost' at least $99,000 of your initial investment.

Question is, where did your hard earned money go?

Unlike your investment, it couldn't have just evaporated of disappeared. Somebody got a hold of it once it left your bank account.



Admittedly, I'm not financially savy and perhaps this question is naive, but WHERE does real money go when a market crashes? Where does it end up?



Did your broker get it? The investment house? The Banks? Nortel?

Or was it divided amongst such parties?



Like to hear some of your replies. Discuss.

A stock market is not a true medium of exchange, it's a measure of current value. When a stock decreases in value, the money by which it is measured disappears. Nobody gets the measure of value which has evaporated.

[Frood]

The recent stock market declines have made me wonder.



For example let's say you have $100,000 in cash you want to invest.

Then someone gives you a stock tip that Nortel trading at $100 a share is a good investment.

So you put all of your savings into Nortel.

But over the course of a year, Nortel stock plummets to $1 a share.

Your stock is practically worthless and you've 'lost' at least $99,000 of your initial investment.

Question is, where did your hard earned money go?

Unlike your investment, it couldn't have just evaporated of disappeared. Somebody got a hold of it once it left your bank account.



Admittedly, I'm not financially savy and perhaps this question is naive, but WHERE does real money go when a market crashes? Where does it end up?



Did your broker get it? The investment house? The Banks? Nortel?

Or was it divided amongst such parties?



Like to hear some of your replies. Discuss.

Anything owned outright and is tangible whether that be property, goods, or precious metals but reasonably diversified. We don't use brokers and we don't rely on credit. If we can't afford something, we go without it. If we can pay cash and think it's got real potential current or future value, we invest in it.



There are no guarantees in this life. Spread yourself out to mitigate the sort of loss which planners are hired to milk you of. That's our way of being. We could have more if we played the game, we could have less if we do play the game. We don't want more or less, just what we have worth preserving. It's a mugs game.