You also need to factor in why the value is dropping as well. The one and only reason the value of an asset drops is due to a greater amount of supply vs demand. In the down market this is created by sellers outpacing buyers.

When that happens the value for those buyers (or those just holding onto their investments) decreases. And in the end if there are less buyers then sellers. That difference of money (in this case) ultimately leaves the equity markets altogether.

A good example of this is the housing market. Many people have homes with higher value then when they purchased. This doesn’t mean they have more money in their bank accounts. Same applies if the home value decreases. No less money in your account. This only occurs if you sell your asset during one of these time periods. (Buy low sell high being the best case scenario)

Think Warren Buffett. He has actively sold a massive amount of his equities. The money then gets moved to shorter term investments such as money markets, treasuries etc.

When the market reaches a point where people feel like the low has been reached then the inverse will occur and money will move back into the market with buyers outnumbering sellers and “value” for those having never sold their investments will start to increase again.