Realized vs Unrealized Gains (and Losses!)

The stock market is freaking nuts! The Dow is up; now it’s down, now it’s the highest it’s ever been, now it’s dropped the most significant percent in history…what the hell is going on?  

You’ve lost big, then you’ve won big, and now you’ve lost again. But have you really lost?  Did you realize your losses?  

Knowing the difference between realized and unrealized gains and losses is incredibly important. 

Capital gains and losses represent the money you either make or lose when a stock you own fluctuates in value.

What are capital gains and losses?

But the big secret is that neither of these things is real until you make them real (of course exceptions will apply in certain situations)

Are capital gains realized or unrealized?

Realizing a gain or a loss means selling the investment and getting the cash value.

How Do You Realize Gains and Losses?

There are caveats to this. Owning individual stocks is way riskier than owning index funds. Your initial investment may be decimated, and it may never regain its value.