realized vs unrealized losses explained

In the stock market, losses come in two forms: "Realized" and "Unrealized". Understanding the difference helps investors stay calm and make better decisions.

An unrealized loss happens when the price of a stock you own goes down, but you haven’t sold it yet. For example, you buy a share for ₹1,000 and its current price drops to ₹800. You are showing a loss of ₹200, but only on paper. You still own the share, and the price can go up again. Nothing is final at this stage.

A realized loss occurs when you actually sell that share at a lower price. If you sell it at ₹800, the ₹200 loss becomes real. The moment you sell, the loss is locked in and cannot be reversed.

This difference is important because markets move up and down all the time. Many great investors experience unrealized losses during temporary drops, but they don’t panic. They wait for the business to recover. Losses only become permanent when you exit.

Knowing this helps you separate short-term price noise from long-term reality—and keeps emotions from driving your investment decisions.

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