When trading or investing, money lost in the stock market doesn't disappear but is redistributed among other market participants. When an investor or trader experiences a loss, it's typically because they sold a stock at a lower price than what they paid for it.
In this transaction, the money lost goes to the investor on the other side of the trade, who profited from the sale. This can be an individual investor, a trading institution, or even a market maker.
See also: Where Does The Money Go When You Buy A Stock?
In essence, the stock market operates on a zero-sum or negative-sum basis, meaning that for every dollar lost, another party gains that same dollar. However, it's important to note that in the broader context of the market, money is not simply shuffled between investors.
See also: How Do Stock Traders Make Money?
Instead, it can flow into or out of the market as a whole, affecting overall market capitalization. Moreover, some losses may be absorbed by trading costs, such as brokerage fees, which reduce the total loss.
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