Realised vs Unrealised P/L — Money in Your Pocket vs Money on Paper

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💰 Realised vs Unrealised P/L — Money in Your Pocket vs Money on Paper

Most investors check their portfolio and see numbers changing every day — but not all those gains (or losses) are real.
Let’s clear that up.

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🧠 The Simple Truth

• Realised Profit/Loss → You sold the investment. The gain or loss is locked in.
• Unrealised Profit/Loss → You still hold the investment. The value changed, but it’s only on paper.

Think of it like a house:

The market value of your house may rise — that’s unrealised profit.
You only realise it when you sell.

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📊 Real-World Example

You bought AAPL at £150.
Today it's £170.

If AAPL drops back to £150 before you sell, the unrealised gain disappears — you never actually made (or lost) money.

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🧮 Try It Yourself — P/L Calculator

Paste this code snippet into your local repo (/components/PLCalculator.tsx)

import React, { useState } from "react";

export default function PLCalculator() {
  const [buy, setBuy] = useState(150);
  const [sell, setSell] = useState(170);
  const [shares, setShares] = useState(10);

  const pl = (sell - buy) * shares;
  const percent = ((sell - buy) / buy) * 100;

  return (
    <div className="max-w-sm p-4 border rounded-xl bg-white dark:bg-gray-900">
      <h3 className="font-semibold mb-2">P/L Calculator</h3>
      <label>Buy Price (£)</label>
      <input value={buy} onChange={e=>setBuy(+e.target.value)} type="number" />
      <label>Sell Price / Current Price (£)</label>
      <input value={sell} onChange={e=>setSell(+e.target.value)} type="number" />
      <label>Shares Held</label>
      <input value={shares} onChange={e=>setShares(+e.target.value)} type="number" />
      <p className="mt-3">
        <strong>{pl >= 0 ? "Gain" : "Loss"}:</strong> £{pl.toFixed(2)} 
        (<strong>{percent.toFixed(2)}%</strong>)
      </p>
    </div>
  );
}

💡 Tip: Change the “Sell Price” to test different outcomes — what’s your profit if AAPL falls to £145?

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📚 Why This Matters for You

• You only pay taxes on realised gains.
• Unrealised losses may recover — don’t panic-sell.
• Knowing the difference helps you plan exits, re-entry, and rebalancing.

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📺 See It in Action

Inside Pocket Portfolio → Trades → P/L View, you’ll find unrealised values.

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⚠️ Common Mistakes to Avoid

1. Celebrating too early — gains aren’t real until sold.
2. Ignoring taxes — realised profits can trigger capital-gains tax.
3. Confusing volatility with loss — prices move, but that’s not final.

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✅ Key Takeaways

• Realised = sold = final profit or loss.
• Unrealised = still invested = paper profit or loss.
• Pocket Portfolio shows both transparently so you always know what’s real.

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🔗 Further Reading & References

• FINRA Smart Investing Basics
• CFA Institute — Measuring Performance Accurately
• Set up Google Drive Sync →

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🧩 This article is part 1 of the “Investing Made Simple” series. Next up: [Reading Your Portfolio Timeline Like a Pro →]

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Educational content only — not financial advice. © Pocket Portfolio 2025 · Evidence-First Investing for Everyone.

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Key Takeaways

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