#FinanceTwitterJa There is a distinct difference between a realized gain and an unrealized gain. An unrealized gain is just the increased value in an asset or holding based on the current market price. Eg, You bought $100,000 worth of Wigton at IPO ($0.50). It's now trading at $1
On your monthly statement from your broker, you would see original/portfolio cost ($100k), unrealized gain/loss ($100k) and current value $200k. The current value of Wigton is $200k, but you have an unrealized gain of $100k due to the increase in the market value of the stock.
Now, if you were to sell Wigton at $1, you would have to pay a 2% commission, 0.33% in fees to JSE and 16.5% GCT for a settlement amount of $194,571.10. Note, by selling Wigton, one would be exchanging your shares (asset) for payment (cash). Your profit would be $94,571.10.
This would be your realized gain. 'Realized' gain because you sold the stock and collected more money than what it originally cost you. The converse (realized loss) would also apply in the case where you received less money than what you paid for the stock.
Please note, this principle doesn't only apply to stocks. It can apply to other securities or assets which have a publicly traded value. If you look at some companies income statements, you will tend to see unrealized gain/(loss) on foreign exchange/securities.
So, the next time you receive a statement from your broker and see these things, just take a second and read it carefully to get a better understanding of what is happening to your investment. Note, I am not saying you should sell Wigton but I am providing an educational example.
