Unrealized Gain
Definition
The profit on a position that has not yet been sold — a 'paper' gain that becomes realized upon sale.
Explanation
Unrealized gains are not taxed until the position is sold (realized). This tax deferral is a significant advantage of buy-and-hold investing — you control when you pay taxes. The step-up in basis at death eliminates unrealized capital gains for inherited assets entirely. Unrealized gains can also reverse — a paper profit can become a paper loss if the stock declines. The psychological challenge: investors often feel richer from unrealized gains and resist selling winning positions to realize the gain (part of the disposition effect).
How Stoquity Uses This
Stoquity incorporates unrealized gain analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.