How to Calculate Unrealized Gain

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An unrealized gain is the return on an asset (e.g., stocks, bonds, precious metals, etc.) that results from a rise in its market value. In other words, though an investor may make a profit from an asset whose price increases, the profit will be unrealized unless they sell the asset. Also called a "paper profit," an unrealized gain can be calculated using simple arithmetic.

On a sheet of paper, write the asset's market value following the increase. Beside it, write a minus sign (-) and then write the asset's initial market value prior to the change. Place an "equal" sign (=) beside the latter.

Enter this subtraction equation into a calculator, and press the "=" key. Write the result, or difference, to the right of the "=" on the sheet of paper.

Re-write the result followed by a multiplication sign (x) beneath the existing equation. After the multiplication sign, write number of units** of the asset you held at the time the rise in price occurred, and place an "equal" sign beside the latter.

Enter the foregoing equation into a calculator and press the "=" key. Write the result, or product, to the right of the "=" at the end of the second equation. This figure represents your unrealized gain.

Tips

  • Such an asset might be a stock, bond, or mutual fund. Resources for retrieving these figures are suggested under "Resources" below. *If the asset in question is a stock, this number would be the number of shares held. In the case of a precious metal, such as gold, this number would be the number of ounces held.

Warnings

  • Due to the fluctuating nature of market prices, the reality is that unrealized gains can diminish or increase within a relatively short span of time. For this reason, it is advisable to note the date and time of a price rise for comparative purposes at a later time.

About the Author

Nicholas B. Sisson holds a B.A. in economics from Ithaca College and a certificate in technical communication from J.B.S. Technical Communications, Ltd. Working in investment operations, Sisson participated in an initiative to revise and rewrite his group's procedure manual. More recently, Sisson created definitions of financial terms for the glossary of a major financial website. He has been writing since 2008.

Photo Credits

  • diagram of profit image by NatUlrich from Fotolia.com