Realized vs. Unrealized Gains, Explained
A realized gain is locked in when you sell; an unrealized gain is still on paper. The difference changes how you read your portfolio and your taxes.
Open any brokerage app and you will see a green or red number next to your holdings. That number is almost always an unrealized gain — and confusing it with a realized one is how people get surprised at tax time.
The one-sentence difference
An unrealized gain is the profit you would make if you sold right now. A realized gain is the profit you actually locked in when you did sell. Paper versus banked.
You own 20 shares of MSFT with a cost basis of $400 each ($8,000). The
price is now $450.
- Unrealized gain:
20 × ($450 − $400) = $1,000— on paper. - You sell 20 at
$450. That$1,000is now realized.
Nothing about your wealth changed at the instant of the sale — but your tax bill did, because only realized gains are taxable.
Why the distinction matters
Three practical consequences:
- Taxes apply to realized gains, not unrealized ones. You can sit on a large unrealized gain for years and owe nothing until you sell.
- Your real return blends both: banked profits plus paper ones. A tracker that only shows market value hides the realized half.
- Decisions change. Selling to "lock in" a gain is a tax event; holding is not.
Note
Both kinds of gain are measured against your cost basis. If you are fuzzy on that, start with what cost basis is — the rest follows from it.
Seeing both at once
The trouble with most tools is that they show one number and call it your return. A portfolio is honest only when it shows unrealized gains on what you still hold and the realized gains from what you have already sold. That is the view StoxDeck gives you on every load, and it is a big reason people drop the spreadsheet entirely.