Unrealized Loss
 |
Definition of 'Unrealized Loss'A loss that results from holding onto an asset after it has decreased in price, rather than selling it and realizing the loss. An investor may prefer to let a loss go unrealized in the hope that the asset will eventually recover in price, thereby at least breaking even or posting a marginal profit. For tax purposes, a loss needs to be realized before it can be used to offset capital gains. |
 |
Investopedia explains 'Unrealized Loss'For example, assume an investor purchased 1,000 shares of Widget Co. at $10, and it subsequently traded down to a low of $6. The investor would have an unrealized loss of $4,000 at this point. If the stock subsequently rallies to $8, at which point the investor sells it, the realized loss would be $2,000. For tax purposes, the unrealized loss of $4,000 is of little significance, since it is merely a "paper" or theoretical loss; what matters is the realized loss of $2,000. |
Related Definitions
Articles Of Interest
-
Selling Losing Securities For A Tax Advantage
Tax-loss harvesting can help you to reduce taxes on your portfolio gains, but make sure you know the rules! -
What To Do When Your Options Trade Goes Awry
Check out some repair strategies to help boost the profit potential of a losing position. -
The Stop-Loss Order - Make Sure You Use It
It's a simple but powerful tool to help you implement your stock-investment strategy. Find out how. -
What are unrealized gains and losses?
An unrealized loss occurs when a stock decreases after an investor buys it, but he or she has yet to sell it. If a large loss remains unrealized, the investor is probably hoping the stock's fortunes ... -
There Are New REITs On The Horizon
For investors, the surge in new REIT activity is providing some pretty interesting dividend opportunities. -
5 ETFs Flaws You Shouldn't Overlook
Despite their popularity, exchange traded funds have some drawbacks that investors should know about. -
Using The Price-To-Book Ratio To Evaluate Companies
The P/B ratio can be an easy way to determine a company's value, but it isn't magic! -
Liquidity Vs. Solvency
Learn about the differences between these two words and how each one is used in the stock market. -
How are capital gains and dividends taxed differently?
The U.S. tax code gives similar treatment to dividends and capital gains, although this will change slightly in 2013. Currently, ordinary dividends and short-term capital gains those on assets ... -
How Tax Treatments Of ETFs Work
Here is a look at how ETFs are taxed and the effects that the tax treatment of ETFs will have on investors when they purchase them.
Free Annual Reports
