Is money in the stock market lost?

Answer 1

Yes and No. You hear commentators talk about market losses or gains, these are "paper" losses and gains. If company "X" has a 100 million shares outstanding (in public hands) and yesterday the last price paid for the stock was $2.00 per share, and at the close today, the last price paid is $1.00 per share, then the market capitalization of company "X" is a loss of 100 million dollars. Of course, it can gain it right back if buyers are willing to buy it again at $2.00 per share. So, in this sense, money is not permanently loss. When the Stock Market goes down, and someone sells at a lower prices than they bought, then definitely money is lost to that person. This is called a "capital loss" and is reported on income taxes. The idea that if I never sell the stock I own, I can never lose money, is false because the stock price can go to zero when companies go bankrupt or are delisted. It may be left to a decision of the bankrupcy court to decide if shareholders are entitled to anything for their shares. In this case, there is a permanent loss to the market in general. So, the real loss to shareholders of a company or in the stockmarket in general is difficult to know, as you would have to know when the person bought and sold their shares. However, for any set time period, the paper gains and losses in market capitalization are easy to calculate.