GLOSSARY TERM
Realized vs Unrealized Gains
A realized gain is a profit you have locked in by selling an investment. An unrealized gain is a profit that exists only on paper because you still own the investment.
What does this mean in practice?
If the value of your investment rises, that increase is unrealized as long as you do not sell. Once you sell for more than you paid, the gain becomes realized. This difference matters because realized gains can sometimes create taxes, while unrealized gains usually do not.
Example
You buy an ETF for €1,000 and its value rises to €1,300. While you still own it, the €300 gain is unrealized. If you sell it for €1,300, the €300 gain becomes realized.
Why it matters
This helps you understand the difference between paper growth and actual locked-in profit. It also shows why selling decisions matter, since realizing gains can lead to taxes and reduce how much money stays invested.
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