What are unrealized gains, and what do they have to do with investing?

When you purchase stocks at a certain amount of money, your hope is to have those stocks increase in value and then sell them for a profit. When your stock begins to increase, but you do not sell those stocks, you have unrealized gains. This means you have yet to benefit financially from the increase in value of your stock. What does this have to do with investing? Well, the answer is so obvious it almost hurts to explain it. It has everything to do with investing.

When investing into any part of the stock market, your immediate goal is to buy a stock that will increase in a reasonable amount of time so that it can then be turned around and sold for a considerable profit. The moments waiting for the stocks to become worth more and more, after they are higher than your initial investment price, you are experiencing unrealized gains. The gain becomes "realized" when it is sold. The supposed value now becomes an actual number because there is money in the bank. When investing, it becomes a habit for the investor to always weigh their realized gains and losses and figure out how to balance them and hopefully averaging out on top of the game. The tricky part of depending on unrealized gains is that they can change at any time. If there is a big jump, it can be very tempting to give in and sell them right away and collect the profits. With patience, it could prove more lucrative to wait and hope for the stock to increase even more. This can be less than a gamble if time has been spent analyzing the market and forecast predictions for companies. Third-party agencies that study the market offer services to provide data for curious investors and broadening companies. Taking time to do this extra work can make unrealized gains become even larger by knowing when sell.

Let's say that your business invests a certain amount of money every month into the stock market to try and make extra money to use to run the business. In this case, unrealized gains are extremely important and are needed right away. Some of those stocks can be sold right off to make that bit of money that is needed. Since the business is investing regularly, they do not have to sell all of their stocks, or even a large percentage of their stocks, in order to make some money for their business. This may appear to be a short term way of playing the market, but it is actually done with a long term eye for the future. Always investing monthly means that in the future there will be room enough to sell and use money when it is needed. While waiting longer for the stocks to go up would make more money, it is not a guarantee that they will go up at all. Deciding beforehand what your investment goals are will make these important decisions easier when the moments arise.

Unrealized gain can also be found in other areas of ownership. Whether you put speakers into your car or do remodeling work on your home, the value of those things increase for when it comes time to sell. Learning how to take advantage of unrealized gains will help make you future more lucrative.