Think of it as an exchange. A dollar is worth two coconuts. If you have two coconuts, you can reasonably expect to trade them for a dollar. Until there's a coconut blight, the coconut harvest goes down and demand for coconuts rises Now coconuts are a dollar each. Or maybe the Maldives discover an easy way to ship coconuts for Florida and suddenly coconuts are three for a dollar.

You don't have dollars. You have coconuts. The exchange of dollars to coconuts changes based on market conditions.

Suppose you're a big booster of solar energy, and you have a pension fund. In that pension fund you have ten thousand dollars. You decide SunEdison has a bright future so you buy ten thousand dollars worth of SunEdison stock. Now you have zero dollars in your pension fund but you know you can exchange it for whatever your 500 shares (or whatever) of SunEdison stock are worth.

THIS IS THE IMPORTANT PART

You have already lost your money. Your money holdings are zero. However, you have traded them for what you think is a greater future value. And if SunEdison goes to $25, you can cash out your 500 shares (or whatever) and suddenly you have $12,500.

But you don't have that $12,500 until you exchange your shares for cash.

Now suppose that instead of going to $25, SunEdison blows up. Now, in addition to having zero dollars, you have 500 shares (or whatever) of worthless stock that you can exchange for exactly nothing.

So. Money is neither created nor destroyed. VALUE, on the other hand - the value of your investment - is fluid.

The money that went into the stocks was spent by whoever sold you the stocks. What you've lost, in a nutshell, is the money you'd get from selling it to someone else.

Does that make sense?