Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Unrealized Loss

What it is:

An unrealized loss is a paper loss from holding an asset that has lost value but has not yet been sold.

How it works (Example):

Unrealized losses are losses in asset value, but not cash value.  For example, an investor may have a stock that has lost 25% of its value with the general decline in the market.  If the investor sold the asset, he or she would realize a cash loss.  Instead, the investor holds the asset, hoping that it will rise in value.  In the meantime, the investor is able to report an unrealized loss on his or her financial statement. 

Why it Matters:

Unrealized losses or gains are particularly important from a tax perspective.   For example, capital gains are only taxed when they are realized.  For unrealized losses, they are not counted as losses until they are realized.

At the same time, from an investor performance perspective, a loss is a loss, even if it unrealized.  The paper loss in a portfolio will affect the amount of collateral or leverage available to the investor.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...