Where does the money go?
Where does the money go, when share market prices fall? Is an interesting question and most of the people are not aware about, what actually happens with the money, they have invested in the share market.
When we hear that the share market has lost $40 billion dollars in a day, it can be quite shocking. How can so much money be disappear off the market in a day? Except someone’s stock has been increasing, it is tough to create money in a declining market. In fact one of the few methods is to short sell stock or use options. Both these policies are relatively advanced and typically not an area of everyday investors. If someone is a daily investor, it can appear quite mysterious.
Primary and secondary market
The stock market is like any market. In fact, investing in stock is like investing in assets. In the stock market, the primary market is the first deal between the shares of the company and first buyer. This primary raising of money is called an Initial Public Offering (IPO) or a float. After this, trading on secondary market of shares begins, and once the shares are traded on the share market, the company does not receive any money from buyers selling their shares to someone else.
Sometimes we hear that, property rates have gone down by 10% and the question arises, does the money just vanish? The money does not vanish but it does mean that sellers possibly have lost money compared to the last year.
If $40 billion dollars disappeared off the market in a day, it just talks about the value of the NYSE (New York Stock Exchange) share market declining.