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

Realized Gain

What it is:

Realized gains are increases in the value of an asset that has been sold. This concept is the opposite of paper profit -- a paper profit only turns into a realized gain when you actually sell the security.

How it works (Example):

Let's assume you own 100 shares of Company XYZ that you purchased for $1,000. If the value of the investment increases to $5,000 but you sell the shares, your realized gain equals $4,000.

Why it Matters:

Capital gains are generally only taxable when the asset is actually sold (i.e., when the gains are realized). Changes in tax rates may influence the timing of an investor's decision to realize gains.