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Profit that exists on paper but hasn't been locked in yet because you haven't sold.
Why It Matters
An unrealized gain is Schrödinger's profit - it exists and doesn't exist at the same time. You bought Apple at $100, it's now $150, you have a $50 unrealized gain. But until you sell, that gain can evaporate. You also don't owe taxes on unrealized gains (a huge advantage of buy-and-hold). Only when you sell does it become real - and taxable.
Key Points
- No taxes owed until you sell (can defer for decades)
- Also called 'paper gains' - they're not real until realized
- Unrealized losses work the same way - no tax benefit until you sell
Learn More
Investment Taxes 101
Get a complete explanation with examples, key takeaways, and a quiz to test your knowledge.
Related Terms
Common Questions
Profit that exists on paper but hasn't been locked in yet because you haven't sold. An unrealized gain is Schrödinger's profit - it exists and doesn't exist at the same time. You bought Apple at $100, it's now $150, you have a $50 unrealized gain.
An unrealized gain is Schrödinger's profit - it exists and doesn't exist at the same time. You bought Apple at $100, it's now $150, you have a $50 unrealized gain. But until you sell, that gain can evaporate. You also don't owe taxes on unrealized gains (a huge advantage of buy-and-hold). Only when you sell does it become real - and taxable.
No taxes owed until you sell (can defer for decades)
Also called 'paper gains' - they're not real until realized
Unrealized losses work the same way - no tax benefit until you sell