Unrealized Loss

Dictionary Says

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 Says

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.

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