> I'm astonished that somebody could think stock losses are somehow less harmful than losing cash. That's just wrong.
People behave much differently if the make or lose $100K in cash, vs making or losing $100K in stock holdings. Wealth effect.
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.