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What is a Realized Loss?

A realized loss is a decrease in the value of an asset that has been sold. This concept is the opposite of paper loss or unrealized loss -- a paper loss only turns into a realized loss when you actually sell the security.

How Does a Realized Loss Work?

Let's assume you own 100 shares of Company XYZ that you purchased for $1,000. If the value of the investment decreases to $200 and you sell the shares, your realized loss equals $800.

Why Does a Realized Loss Matter?

Changes in tax rates may influence the timing of an investor's decision to realize losses. From a tax perspective, realized losses can often offset realized gains and thus lower a person's potential capital-gains taxes.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.