I just started an investment account and I have no idea what “Unrealized Gain/Loss” means. I’ve tried looking it up and asking friends but its just not clicking with me. Can anyone explain to me in the simplest terms possible with no jargon. Thanks!
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Realization is when you turn something into cash. Any increased in decrease in price before you sell the asset is unrealized.
So, for example, if you buy a house for $200k and next year you get it appraised for $300k, you have a $100k _unrealized_ gain – the house has gone up in value, but you don’t actually have any of that cash in hand.
If you then _sell_ the house for $300k, that $100k increase in value is realized – you now have the extra cold, hard cash in hand.
Let’s say in that account you put $100 in, and in the past month it’s grown to $110 (very good job). You have an “unrealized gain” of $10. Cuz you gained $10 dollars but you haven’t actually pulled it out of the account yet, tomorrow the market could crash and your account could drop to $90, now you’d have an unrealized loss of $10.
But until you actually pull the money out of the account, it is unrealized.
It means gains/losses you haven’t converted to cash.
if you buy a stock at $100 and it goes up to $110, you have $10 in unrealized gains. If you sell the share at $110, then it’s a realized gain of $10. Only when you sell and have realized the gain, would you then be taxed on it, owing capital gains taxes on the $10 of realized gains.
When you invest your money in different assets like stocks, bonds, or mutual funds, the value of those investments can go up or down over time. The “Unrealized Gain/Loss” refers to the change in value of your investments from the time you bought them until the present moment.
If the value of your investments has gone up since you bought them, you have an “Unrealized Gain.” This means that if you were to sell those investments right now, you would make a profit based on the increase in their value.
On the other hand, if the value of your investments has gone down since you bought them, you have an “Unrealized Loss.” This means that if you were to sell those investments right now, you would make a loss based on the decrease in their value.
It’s important to note that these gains or losses are only “unrealized” because you haven’t sold the investments yet. They represent the potential profit or loss you could have if you were to sell them at the current value.
It’s quite common for investments to go up and down in value over time, so it’s important to monitor your unrealized gains or losses. They can give you an idea of how your investments are performing, but they don’t become “realized” until you actually sell them.
“Realized Gains” are when the value of your investment is up and you decide to sell, thus taking a profit.
“Unrealized Gain/Loss” means gains that you haven’t converted into cash. As such, your gain today could turn into a loss tomorrow if the value of your investment drops, because you didn’t “realise” the gain earlier (ie take a profit).
You have a band shirt. You bought for $20. This band recently went viral in Tik Tok video. Everyone wants their shirt. You can resell this shirt now for $100!
But you can’t take that shirt to McDonald’a and buy $100 in food. You don’t have $100. You haven’t realized the gains. You have the same amount of money as you started. But the shirt is worth more.
So you decide to sell the shirt to someone for $100 and go buy the buffet of nuggets you’ve been craving. You can do that since you’ve realized your gains.
Turns out the next week, a tweet from the bands lead singer comes out from 15 years ago using the n word. Everyone hates this band now. That $100 shirt is now worth $3. This person has lost no money because he hasn’t realized it.
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