An unrealised gain is a profit that exists only on paper because you have not sold yet. If the market price later falls, the gain can shrink or turn into a loss before you lock anything in. Once you sell above your cost, the gain becomes realised.
Key takeaways
- Portfolio apps often show unrealised gains to track performance, but that number can reverse.
- Tax rules in many places treat realised and unrealised gains differently. Check local law rather than assuming.
- Feeling rich on paper gains can lead people to take more risk than they can afford.
- A realised gain freezes the outcome for that sale. An unrealised gain does not.