Meta hasn't lost 650B. The enterprise value has decreased by that much, but Meta didn't lose that much. Investors did.
But hey this is journalism where you need to draw clicks and 'lost' probably hits home more
In paper value. Odds are most are still up on their investment.
Equity isn't cash.
Meta stock is now at $99, a price last seen in early 2016. Chart: https://finance.yahoo.com/chart/META#eyJpbnRlcnZhbCI6IndlZWs...
So if you would have bought and held the stock any time after that, you'd currently be sitting on a loss.
I'm not so sure about that; FB hasn't traded in this range since mid-2015, doesn't pay dividends and hasn't had any splits. Also, USD today is worth ~20% less in real terms today than it was in 2015
This is real-life loss of value. Saying it's "paper value" makes as much sense as saying the money in your bank account isn't cash because it's just "numbers of a screen".
I'm astonished that somebody could think stock losses are somehow less harmful than losing cash. That's just wrong.
The almost universal advice before buying stocks is that it's only good for the long term, because at any particular moment it might lose its value.
It is always stressed that you shouldn't use money to buy stocks if you might need that money in the next ten years. It is also recommended to move money from stocks to a safer instrument as you get closer to needing to use it.
But I would disagree there too. There are big differences in liquidity for different companies’ shares, and it varies with time.
You might as well say there are big differences in ATM fees depending on where you withdraw money, and it varies by bank.
But that's not the point. These tiny details are utterly irrelevant to the fact that stock value is as real as cash. It's not "paper value" where gains and losses are somehow imaginary or don't count.
Sure, but what is also real is that nominal equity prices can go up or down at anytime, whereas the nominal amounts of cash should not.
When VOO price goes down, I think of that as a very different loss than if my checking/savings account balance were to have gone down without me withdrawing from it.
One should not expect nominal equity prices to be a certain number, or a certain minimum number, especially single stocks. It is paper value, as far as I am concerned.
Well you shouldn't. Your net worth is measurably different because it's all liquid. It's a cognitive illusion if you're thinking of them any differently. And if you're making a big financial decision like whether you can afford a bigger house, I sure hope you're treating them the same.
And at the end of the day even the nominal value of cash isn't what matters -- it's the real value. Inflation and even currency fluctuation change the real value of what your cash can purchase daily, so the value of your cash is changing too. (The only difference is that cash fluctuations are usually slower and more gradual, and that contracts about future payments are generally denominated in currency rather than equity, but of course not always.)
On the contrary, I would suggest most people ignore their equity such as stock when considering whether or not they can afford a mortgage for the very reason of this thread title.
> And at the end of the day even the nominal value of cash isn't what matters -- it's the real value.
I prefer to use the term “purchasing power” rather than “real value”, but I agree with this.
>Inflation and even currency fluctuation change the real value of what your cash can purchase daily, so the value of your cash is changing too.
Correct, which is why buy equity such as stock or broad market ETF. I think the purchasing power of the equity will be higher than cash sufficiently far into the future.
But I do not see the point of worrying about decreases in equity prices in the near future long before I plan on selling. I guess there is no right or wrong, but I feel like worrying about short term changes in price is how people actually lose money by selling low and bugging high, rather than just buying and holding.
So you're saying... when people make a housing purchase decision... they should ignore the value of their savings?
I'm sorry but that's one of the dumbest things I've ever heard. Stocks are savings, they're investments, they're net worth, and treating them as if their value doesn't factor into your financial decisions is utterly nonsensical.
> But it does not help me to pay attention to prices today or the short term.
It sure does if you need to sell some stocks to finance a purchase today. Because you know when people take money to put a down payment on a mortgage? That comes from savings. And savings should be invested in a diverse set of holdings... that includes stocks.
I can see you're holding stocks for the long-term. That's fine and a valid investment decision. But something might happen where you have to dip into them tomorrow. And I can guarantee you, you're going to suddenly be very concerned about a decrease in the value of your equities. And that's the whole point. They're not made-up funny money. They're value as real as cash.
No, I wrote they should ignore non cash or near cash holdings for the purposes of determining how much of a mortgage they can afford.
> Because you know when people take money to put a down payment on a mortgage? That comes from savings. And savings should be invested in a diverse set of holdings... that includes stocks.
Savings that are needed in the short term should not be invested in stocks, or other non liquid and/or volatile assets.
> But something might happen where you have to dip into them tomorrow.
This should only be in the utmost emergency scenarios. Ideally, one has sufficient cash or cash equivalent securities for at least a couple years of expenses. Or at least that is my philosophy.
The point is, liquid stocks (regular publicly traded companies) are not "paper" value that are then somehow different when you go to sell them. They're the same as cash in terms of actual spendable wealth, they just take a couple of days to settle is the only difference -- but that's time, not value. And so when stocks drop like Meta, you've lost real actual wealth. Not in an imaginary "paper" sense or "paper value" as you say, but in a real, "I have less resulting cold hard cash when I cash out" way.
And anyone who says otherwise just doesn't know what they're talking about. This doesn't have anything to do with your investing philosophy, it's just the definition of how stocks and cash work.
But none of this has any relevance to the fact that, for immediate spending purposes, cash and liquid publicly traded stocks are identical.
It utterly irrelevant whether you "should" only hold stocks for money you don't think you'll need for 10 years (which is highly debatable, and day traders certainly disagree). The point is, if you need the money next week, your stocks and your cash are identical. That's all that matters.
GAAP accounting.
https://corporatefinanceinstitute.com/resources/knowledge/ac...
People behave much differently if the make or lose $100K in cash, vs making or losing $100K in stock holdings. Wealth effect.
There is literally no difference in wealth between losing $100K in cash or in stock, assuming the stock is liquid. They are equally "real", 100%.
And the wealth effect has literally nothing to do with this.
(Fine print: assuming your stock is no more than a small fraction of any specific company, and that these might have different effects on taxes. But the general point stands.)
If they have to spend the money now, it would already be in cash.
But if you need to spend the money now, you sell the stocks now so they become cash, which means the stock value is identical to the cash value. That's the whole point. There's no difference between "paper value" and cash value. They're the same.
I mean it might take a couple of days for the trade to settle so you can wire it, but that not the point. The value is just as instantaneous and liquid as cash for all practical purposes, for publicly traded companies generally.
Facebook IPO'd in 2012. The stock is down to its price in October 2015. There are a few people who own lots of shares obtained before October 2015, and they are up. There are probably more people who own a few shares obtained after October 2015, and they are down.