Why unrealized gain matters
It contributes to portfolio performance and risk but can reverse before sale and may receive different accounting or tax treatment.
How it is applied
Managers mark positions, compare fair value with basis, identify currency effects, and distinguish realized from unrealized attribution.
Portfolio example
Shares with $10,000 basis worth $13,000 have a $3,000 unrealized gain before costs and tax.
How to interpret it
The gain is not guaranteed proceeds. Liquidity and market impact determine executable value.
Limitations and common misconceptions
Private valuations may be stale, basis definitions differ, and some regimes tax mark-to-market gains.
Sources and further reading
- Publication 550: Investment Income and ExpensesU.S. Internal Revenue Service
- Dividends and Other Corporate DistributionsU.S. Internal Revenue Service