Wait… Did I Just Lose All My Money Investing in the Stock Market?

The stock market looks real ugly right now. The last six months have been some of the worst for the stock market in the last decades. The Nasdaq is down by 30%, the S&P 500 by over 20%, and the Dow Jones Industrial Average by 15%. It’s lookin’ like a crash, a recession, an “economic downturn”! Which, uh… isn’t pretty.

That’s why I’m choosing not to look!

Indiana Jones does not like to lose money in the stock market.
Dr. Jones: Worst archaeologist ever, merely mediocre investor.

Because when I do look, it seems like aaaaall the gains I’ve earned by investing in the stock market have shriveled up like a scrotum on Hoth. It looks, in other words, like I’ve lost a lot of money.

But have I really? When the stock market crashes, do you really lose money?

How investing in the stock market works

To answer this question, we need to run through an extremely basic explanation of how the stock market works. Like, so basic it’s drinking a pumpkin spice latte on the way to get an ombré dye job. Here goes.

You buy a stock when it’s worth X. The hope is that some day it’ll be worth, like, X+100 or more. And at that time, you can sell it for more than you bought it, reaping a nice fat return. The goal is to take more money out of the stock market when you sell than you spent to buy in.

But despite your goals, the value of any stock you own can fluctuate up and down over months and years. To a large degree… that doesn’t matter at all. What matters is the price at which you sell a stock compared to the price at which you bought it. In other words, the starting balance of your investment portfolio compared to the ending balance when you retire (or take money out of the stock market for any other reason).

If you’d prefer an investing lesson that isn’t wearing Uggs and eating a kale salad, check out our Investing Deathmatch series:

And if you’re not yet invested in the stock market, worry not! It doesn’t even take a lot of money to get started. Consider using our sponsor, Acorns:

If you sign up with the button above, we get paid! Which is pretty neat because I have it on good authority that our assistant’s landlord does not accept rent in the form of Exposure Bucks.

The once and future stock market

Behold this very fancy chart from my business zaddy, The Motley Fool:

^SPX Chart

^SPX data by YCharts

This chart shows the S&P 500 stock market index and its value over time (the DJIA and the Nasdaq run similar courses, but I chose not to include them because again, we’re being basic as a Sex and the City marathon).

For all my baby bitchlings out there who just went “huh??” I’ll translate: this is how much money all the stocks in the stock market are collectively worth over the last century or so. When the line goes up, that’s a good thing. The gray columns represent recessions.

You should notice two things:

  1. Even when the line temporarily dips down… it always goes back up.
  2. Recessions happen all the damn time.

What this data shows is that even when the shit hits the fan—Black Monday, the Dot Com Bubble, the 2008 Recession—the stock market always recovers. The values of most stocks, in the aggregate, go back up even when they temporarily go down. This is partly due to economic growth in the grand sense of the term, and partly due to a bunch of other stuff I’m too lazy to explain right now.

If you want to learn more about economic cycles, we got you:

So did I just lose money in the stock market or not???

Let’s Socratic Method this thing!

SO-CRATES would never lose money in the stock market because he lived thousands of years before its invention.
  1. Did you invest money in the stock market some time in the past?
  2. If so, have you held onto your stocks instead of selling them?
  3. And do you plan to continue holding and not selling for the near future?

If you answered yes to the above questions, then technically, you did not lose money in the stock market during the current downturn. It may look like you lost money on paper, but trust me… you didn’t. Not technically, and not even practically.

But the balance on my investment portfolio went down…

I did not generate that fancy chart up there for my own health! Remember that the stock market fluctuates constantly. The value of individual stocks and of larger units like index funds and ETFs will go up and down and up and down again. It never stays completely flat. Otherwise what would be the point of investing?

So as long as you keep your money invested, it is not lost. It is only lost (or increased!) when you remove your money from the stock market. Sell your investments when their value is lower than when you purchased them and you will lose money in the stock market. Do nothing when the value is lower than when you bought them and… nothing happens. You’re pretty much fine.

In fact, if you do nothing except keep your money invested, you have a chance to gain even more money than you started with. All you have to do is sit tight and wait out the crash.

Of course, there are some important exceptions

Not all stocks recover

In a stock market crash, not all stocks recover. Some companies go out of business, making their stocks worthless.

This is why we don’t really think you should purchase individual stocks as an average investor. You should put your money in index funds and similar vehicles that track the entire market. That way, if a handful of companies fold, you won’t even feel it. Because (see above) the wider market historically has always recovered.

When you retire matters

Because we’re advocating long-term investing, that means you should keep most of your money in the stock market during your working years and only pull it out when you retire. But what if you set your retirement date and then the stock market pulls a Snoopy vs. the Red Baron?


If you retire when the market is crashing, then yeah, you’ll probably lose money. There are things you can do to mitigate that risk—reallocating your funds as you get close to retirement to lessen your risk, working longer, investing in dividend stocks—all of which is a lesson for another day.

Buying on margin

Investors can still lose money when the stock market crashes if they use an investment strategy called buying on margin.

This isn’t something brand new baby investors need to fuck with, but it basically involves borrowing money in order to invest. You split the returns with the lender and both lender and borrower profit (another basic oversimplification, but I’ve got a point to make in fewer than 5,000 words here, people). So if the market crashes, you won’t have any returns to split with the lender. And in technical terms, that leaves you up a creek without a paddle.

Out of control inflation

Ah inflation. Should’ve known that old motherfucker would have something to do with this.

When the rate of inflation outpaces the stock market’s rate of return, investors can lose money. Typically, this happens during hyperinflation. And despite the fact a tank of gas now costs two kidneys and a bone marrow transplant, we’re not actually experiencing hyperinflation right now.

Even so, we do not recommend pulling your money out of the stock market during periods of even high inflation.

I’m here for a long time, not a good time

The stock market is not a fucking game. Which is why I get all grumpy and cantankerous at apps that try to gamify investing by encouraging rapid buying and selling (lookin’ at you, Robinhood). This system is not designed for the average person to get rich by day trading.

Rather, the whole system is designed so that you and I, normal Earth humans, can invest for the long term and eventually profit from the whole exercise. We’re supposed to buy and hold for years at a time, patiently feeding money into the investment monster at regular intervals and waiting for it to poop out compounding returns. It’s not a get-rich-quick machine.

Which is why we don’t ever recommend a practice of rapid buying and selling. You are not the Wolf of Wall Street, my dude. Stick your money in an index fund and sit on it for years. Set it and forget it. If you can, schedule automatic investments and ignore the whole damn thing for months or years at a time.

Not only is this a winning strategy for high long term returns on your investments, but it’ll also save you all the anxiety of frantically watching the value of your stocks go down in real time. Go watch something more entertaining and less stressful. Like Alone!

Buy and hold for the long term and you’ll be fine… probably?

No one knows the future of the stock market. Not the Oracle of Omaha, not Miss Cleo, not my psychic medium of a hair stylist (‘sup girl), and certainly not me. The best we can do—and what I’ve tried to do above—is to rely on historical precedent and best practices to mitigate risk and maximize reward.

That means investing for the long term and not getting panicked by crashes. Follow these methods and you’ll probably be ok! I’m not a professional (I just play one on the internet), but it’s what I’m doing.

Now, did I just put your fears at ease? Do you feel better about all this? Are you going to ignore the stock market and stick with your long-term investing plan? Good. My work here is done. Consider tossing a coin to your Bitches in exchange for this peace of mind:

Ok, Bitch Nation, how are you feeling about the current stock market free-fall? Are you nervously watching the numbers plummet? Are you stonking it to the moon or whatever it is the kids manchildren are doing these days? Did I oversimplify my basic explanations to the point of inaccuracy? Is your money in your mattress??? Tell us all about it in a comment below.

16 thoughts to “Wait… Did I Just Lose All My Money Investing in the Stock Market?”

  1. I’m still a little nervous that the stock market in its entirety will be distant history by the time I retire, but…. this does make me feel better! A very needed reminder in these trying times.

    Sidenote, what are your professional Chances of The Whole Stock Market Going Up in Flames?

    1. When I think about a possible future where the whole stock market goes up in flames, I also console myself with the knowledge that in this scenario, all of global capitalism has failed and we are either living in a social utopia or an apocalyptic hell scape (or a weird combo of the two a la Station Eleven).

  2. This is so helpful and well done, I just… still can’t get past my eternal sense that the stock market is Gross in a “capitalism is so f*cking evil and here is my 401k just blindly contributing to it” kind of way? I’m doomed to be just-slightly-above-broke forever, aren’t I?

    1. I think that is a valid feeling to have about the stock market! We hear a lot of stories about corruption and sketch-ass practices with it! You can try to mitigate it some by investing in socially conscious funds, but they’re not always as SJW-y as we might want. Or try the direct small biz investing mentioned in a recent article here, so you know _exactly_ where your investment is going.

      1. Yes, this. It’s perfectly reasonable (admirable, even) to want to lessen the harm you do by investing in the stock market. Unfettered capitalism is fuckin scary.

  3. Great article. Not sure if you’ve done it, but I’d love to see an article that basically covers “hey you are xx now and ready to retire, you have funds in IRAs, 401ks, and Roth accounts, along with some cash saved… what is the best way to live off of it”. Not looking for specific financial advice and I’m still decades from retirement, but just to start getting an idea on how to start pulling money out in the most cost/fee efficient way possible.

    1. You got it, toots! Considering Kitty retired just a few months ago, I think she’ll be able to pull from personal experience to walk you through this one. Officially adding it to our queue.

  4. At the start of this crash, I “bought the dip” on margin, and I’ve been paying it off since then.
    I missed out on some gains because I front loaded the dip, and it kept dipping.
    No way to know that would happen, or that it’d be different from any of the shorter dips.

    I’m all right with the stock market and my investments, since I know it too shall pass.
    That said, I’m deleveraging now because of fears of lay-offs at my work.

    I’m hoping to write a retrospective about the whole experience, especially since I’m not likely to do margin trading again.
    Just gotta wait for this recession to wrap up… any day now…

    I also just wrote an article about diversification, out of context problems, and my fears of the stock market being made redundant by a collapsing society.
    It’s hard to not see the state of US politics getting out of hand and feel pessimistic.

    1. Ugh, I’m so sorry. I was really hoping that when I mentioned margin calls in the article, no one would say they had lost that gamble. Especially painful as it was your first time buying on margin!
      I look forward to reading that retrospective. I think I’ll learn a lot.

  5. I got into using Personal Capital & other tools to keep an eye on my finances, starting in 2020. I loved it and felt way more empowered about knowing how all my different accounts were doing all in one place! I used to only look at my retirement accounts like once a year, but now I was learning! I was growing! My investment accounts were growing!

    Fast forward to now, i.e. weathering the first big downturn since I started keeping a closer eye, and not gonna lie, the very tool that felt so empowering (during what turned out to be a period of stupid, unsustainable stock market growth) — now feels very stressful and I wonder if I should not look at it anymore. Like now I have a big red number showing me how much I’ve “lost” and it’s hard not to take that to heart!! I am but a tenderhearted mammal, out here trying to buy a house someday and be able to not work when I’m old!

    I am a longterm girl playing a longterm game — I’m obviously not gonna sell. But in the meantime, I’m just trying to temper my impulse to panic and/or “do something” about the “losses” — like take on more freelance clients than I can actually sustain, etc. Which would not be a good look for me! So just trying to keep calm and keep on keepin on.

  6. Its a numbers game. I bought @ X, I want to sell @ +X. Plain and simple. Emotion gets in the way of making sound decisions. Every time I hear margin, put, etc, all I hear is “I walked into the casino and thru a hundred bucks on the floor and walked out.” Hey, as an individual investor, if you can make money that way consistently, then go for it. But I’ll “bet” you won’t and you won’t be able to keep up with the algos the big boys use.
    Long term, index, low to no cost ratio and dividend reinvestment. Don’t get fancy, don’t get greedy and quit tweaking it.
    If you want individual stocks, go research dividend aristocrat to king stocks. Let them drip. Do your due diligence. Don’t forget dollar cost averaging; in other words, consistency…
    That’s all I have to say on the subject……..

  7. I tried to time some buys with the dips, but I don’t think it worked since I’m not able to buy instantly. There’s a day or so waiting period it seems. Oh well, I felt better putting the money into the stock market instead of losing $ to inflation in my savings account. Other than that, I try not to pay much attention to it at all. I’m decades away from needing to access the money yet.

  8. I’m of a similar mindset – I’m just not going to look! If I were closer to retirement, I may be more concerned – but hopefully I would’ve prepared in advance with a less riskier portfolio than what I currently have. As it stands, I don’t plan on retiring for a couple decades, so whatever is going on isn’t really a concern.

    My personal advice to the youngsters who are a long way away from retirement and haven’t seen downturns before: just sit back and relax! If your strategy is oriented around long-term results, you should be fine.

  9. I’ve told myself I’m not going to look either but it’s easier said than done! Best to keep yourself pre-occupied in good times and bad anyway. I’m more of a threat to myself catching speculative fever in a bull market than I am to panic sell in a bear, so this humbling experience has probably been overdue for me haha.

  10. Thank you ladies for consistently posting salient advice delivered through really great writing. It is relatable and I often enjoy a hearty chuckle. This article is uniquely dope in that it sums up, like, ALL pertinent investment advice in one article (I usually don’t comment, but wanted to metaphorically tip my cap that I don’t wear).

    First, you note that volatility or sequence of returns isn’t really a risk until you introduce flows (i.e. why retirement should change your view of volatility drastically), second, the real investment risk is permanent capital impairment, which only happens when you stupidly invest in stupid stocks of stupid companies that have an unsustainable value proposition (can you tell I’ve been burnt?), and third, that sitting on the sidelines (especially during periods of high inflation) is absolutely going to demolish your real return in the long run.

    I, like most fools, am tempted to wait it out and try to buy the bottom, but almost all research suggests ordinary laypeople like me can’t time markets… so I hope everyone is with me: putting their head down, biting their lip, plowing forward and dollar-cost averaging this bitch until sunnier days return!

    Thanks again for your wisdom and wit!

    1. What a sweet comment! Thank you so much!
      Timing the market is such a gamble I don’t even pretend to try. I’m in it for the long haul… just can’t look when the news is all doom and gloom.

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