Unrealized profit
Unrealized profit is the gain or loss on an investment you still hold. If you bought units for ₹100,000 and they are currently worth ₹120,000, the ₹20,000 difference is an unrealized gain. The amount can change as the market value changes.
Realized profit
Realized profit is associated with an investment that you have sold. Once a transaction closes, the gain or loss becomes realized for that sale. A portfolio may therefore contain both realized gains from completed sales and unrealized gains on holdings that remain open.
Why the distinction matters
Looking only at the current portfolio value can miss the history of what has already been sold. Looking only at realized profit can understate the value still sitting in current holdings. For a complete review, keep both figures visible.
How to review a portfolio
- Start with total invested capital.
- Review realized gains and losses from completed sales.
- Review the current value and unrealized gain or loss of open holdings.
- Use a return measure such as XIRR when cash flows occurred on different dates.
Put it into practice with FolioTrack
Once you know what you want to measure, the next step is keeping the information organised so you can review it again later.