The increase or decrease in the value of an investment that has not been sold or closed, representing a theoretical profit or loss that exists only on paper. Unrealized gains and losses become realized only when the asset is actually disposed of through a sale or settlement. They are important for portfolio valuation, tax planning, and risk management, as large unrealized losses may trigger margin calls or force position liquidation.
Example
“The portfolio showed $15,000 in unrealized gains on the tech stock holdings, but since none had been sold, no capital gains tax was owed yet.”