Here's an odd thought experiment:
Suppose 1 share of Fund XYZ costs 100 Currency today. Also suppose that an inflationary event causes Currency to lose 90% of its buying power overnight (100 Currency tomorrow only buys what would have cost 10 Currency today).
Tomorrow, 1 share of Fund XYZ has market value of 1000 Currency.
Did a person who holds 1 share of Fund XYZ really gain anything?
I hypothesize that what people actually perceive when markets go down, is loss of Buying Capacity at a specific point in time. People sort of have a general sense of what a house costs in their area, or how much they'd have to pay for an automobile, or what they'd pay for a bag of groceries that they typically purchase. It's easy to run the math on Market Value of securities and get a sense of what one could or could not buy on a particular day if they theoretically sold their assets.
However, Buying Capacity is not the same as Money.
Money can have vastly different Buying Capacity at various points in time. Even in periods of low inflation, like today, the Buying Capacity of money slowly erodes, as arcticpineapplecorp astutely noted in their post above ("five different ways people think about "losses" (choose your own adventure)"). My thought experiment involving inflation is pretty severe, to illustrate the point more clearly, that Buying Power != Money.
When stocks and other assets go down, I perceive that I have lost Buying Capacity in the moment, but my purpose of owning those assets is to have a chance of growing Buying Capacity that I can use decades in the future. Edit: Selling stock assets that have gone down means losing that future growth potential, although I could theoretically buy back in (easier said than done in a down market). Holding those assets means keeping that future growth potential.
First Principles: (1) Diversify (2) Low Cost (3) Stay the Course | 3-Fund Index Portfolio