We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Unrealized Loss?

Malcolm Tatum
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Sometimes referred to as a paper loss, an unrealized loss is a situation in which an investor has sustained a loss on a stock or other security, but has not yet officially taken the loss. This unrealized loss may be a temporary situation, assuming that the value of the security begins to increase once more, and exceeds the price that was originally paid for the shares. Should the investor choose to sell the security while the price is still below that original purchase price, the unrealized loss is realized and can be claimed as a capital loss.

The easiest way to understand the nature of an unrealized loss is to consider the purchase of a thousand shares of a given stock. Several weeks after that purchase, the value of those shares begin to plummet, owing to some unanticipated event or shift in the marketplace. Within a day or two, the value of those shares is half of what the investor paid initially. This means that the shareholder has experienced a fifty percent unrealized loss on the investment.

Depending on the circumstances surrounding the trend, the investor may project that the stock will soon level off and begin to increase in value once more. If that is the case, he or she may choose to hold onto the shares and eventually reduce the amount of unrealized loss as the stock value increases to a level that is more than the original purchase price. This would create what is known as an unrealized gain.

Should the stock fail to recover and instead continue the downward trend, the investor will experience an increase in unrealized loss. Once it is clear that the stock is not going to recover, the investor would do well to sell the shares before the value decreases any further, and thus prevent any further increase in the loss. Upon the sale of the stock, the unrealized loss becomes a realized loss, and can be claimed as tax deduction during the period when the loss is realized.

Both an unrealized loss and an unrealized gain remain in that state until the investor chooses to sell the security. At that point, the gain or the loss is realized, and the value of the investment portfolio is adjusted accordingly. This is important, since many tax agencies do not consider capital gains to be taxable until those gains are realized. In addition, the loss usually cannot be claimed as a deduction until the amount is realized.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.