unrealized loss

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Paper Loss

A loss on an investment that has not yet been realized. That is, a paper loss occurs when the current price of a security which is still owned by the holder is lower than the price the holder paid for it. As a result, it is possible that the paper loss might be erased if the price increases again. A paper loss represents a decrease in one's net worth, but it may or may not affect one's lifestyle. See also: Paper profit.

unrealized loss

The reduction in value of an asset that is being held compared with its original cost. An unrealized loss usually must be realized by closing out the position before it can be recognized for tax purposes. Also called paper loss. Compare realized loss. See also wash sale.

Unrealized loss.

If the market price of a security you own drops below the amount you paid for it, you have an unrealized loss.

The loss remains unrealized as long as you don't sell the security while the price is down. In a volatile market, of course, an unrealized loss can become an unrealized gain, and vice versa, at any time.

One reason you might choose to sell at a loss, other than needing cash at that moment, is to prevent further losses in a security that seems headed for a still-lower price.

You might also sell to create a capital loss, which you could use to offset capital gains.

References in periodicals archive ?
The Net Loss for the six month period ended June 30, 1994 includes an unrealized loss on the Company's investment portfolio of approximately $1,100,000 ($.
8 million unrealized loss that is being recognized currently results from future adverse movements projected by the Bankers Trust valuation model.
An unrealized gain of $789,000 was recorded on the contracts in the first quarter of 1993, which was followed by an unrealized loss of $1,249,000 in the second quarter, for a net unrealized loss on the contracts of $460,000 for the six-month period ended June 30, 1993.
At the end of the third fiscal quarter, the net realized and unrealized loss was $8 million.