realized vs unrealized gains

Realized gains occur when you sell an asset, like stocks or property, for more than you paid for it, resulting in actual profit at that moment. For example, if you bought shares for $1,000 and sold them for $1,500, your realized gain is $500. Unrealized gains, on the other hand, represent potential profit on investments you still own. If those shares you bought for $1,000 are now worth $1,500 but you haven't sold them yet, that $500 increase is unrealized. Essentially, realized gains are profits you've confirmed through sales, while unrealized gains are paper profits yet to be cashed in.