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 Loss

What it is:

A realized loss is a decrease in the value of an asset that has been sold. This concept is the opposite of paper loss or unrealized loss -- a paper loss only turns into a realized loss 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 decreases to $200 and you sell the shares, your realized loss equals $800.

Why it Matters:

Changes in tax rates may influence the timing of an investor's decision to realize losses. From a tax perspective, realized losses can often offset realized gains and thus lower a person's potential capital-gains taxes.