|
Paper Profit (Paper Loss)
What does it mean?
Unrealized capital gain (or capital loss) in an investment. It is calculated by comparing market price of the security to the original purchase price. Gains or losses only become realized when the security is sold.
In Other Words...
Investors commonly justify bad investing decisions because of paper gains or losses. Two examples:
1) Although you officially recognize a transaction when you sell a security, many investors believe they haven't lost any money in a sinking investment because they haven't yet sold it. While you don't have a capital loss for tax purposes, there is a loss in value.
2) On the flip side, the dotcom boom saw many "paper millionaires" being created because of stock options. The problem was that rules in option contracts made it impossible for these people to sell their stock and realize their wealth. Consequently, after the dotcom market crashed, many paper millionaires went broke.
Related Links
Sorry, there are no related links.
Related Terms
Bubble | Capital Gain | Capital Loss | Dotcom | Unrealized Gain | Unrealized Loss
1 |
A | B |
C | D |
E | F |
G | H |
I | J |
K | L |
M | N |
O | P |
Q | R |
S | T |
U | V |
W | X |
Y | Z
|
