Unrealized Gain/Loss

An unrealized gain is the profit on an investment that you’re still holding. If you bought a stock for $1,000 and it’s now worth $1,400, you have an unrealized gain of $400. If the stock dropped to $800 instead, that would be an unrealized loss of $200. The key word is “unrealized” because you haven’t sold yet. Nothing has been locked in.

How it works

As long as you hold the investment, the gain or loss is just on paper. It can grow, shrink, or disappear entirely depending on what the market does. Once you sell, the gain or loss becomes “realized,” and that’s when taxes come into play (in a non-registered account).

Your brokerage will typically show your unrealized gains and losses in your account summary. It’s calculated by comparing the current market value to your book value or adjusted cost base.

Why it matters

Unrealized gains don’t trigger any tax. You could hold an investment that’s tripled in value and owe nothing until you sell. This is sometimes called the benefit of “buy and hold,” since you’re deferring taxes for as long as you stay invested.

On the flip side, seeing unrealized losses can be stressful. But a loss isn’t permanent unless you sell. Markets go up and down, and an unrealized loss today could turn into a gain tomorrow. The distinction between realized and unrealized is worth keeping in mind before making emotional decisions about your portfolio.