A brokerage account can show a gain before any shares have been sold. That gain is unrealized: it compares the holding's current value with its recorded cost. A realized gain comes from a completed disposal, such as a sale. The distinction describes what happened to an investment. It does not say whether selling or continuing to hold is appropriate.
The example below uses a fictional US stock and US dollars. It leaves out transaction fees, dividends, taxes and cost basis adjustments so the arithmetic stays visible.
A price change without a sale
Suppose you bought 100 shares of Example Company at $40 each. The recorded purchase cost is 100 times $40, or $4,000. Later, a quoted price of $46 values the shares at $4,600.
The difference is an unrealized gain of $600. Relative to the original $4,000, that is 15%. The account contains the same 100 shares. No $600 payment has arrived merely because the quote changed.
If the quote then falls to $38, the holding's value becomes $3,800 and the unrealized result becomes a $200 loss. The earlier $600 figure was a measurement at a particular price and time. It was never a fixed amount of cash owed to the account.
A partial sale creates two separate results
Now return to the original purchase and suppose 25 shares are sold for $48 each. The sale proceeds are $1,200. In this simplified single-purchase example, those shares have a cost of 25 times $40, or $1,000. The realized gain is $200.
The remaining 75 shares still have a recorded cost of $3,000. At a later quote of $46, their market value is $3,450, which gives an unrealized gain of $450. The two figures describe different parts of the original position.
The account now holds $1,200 of sale cash and $3,450 of shares, assuming the cash has stayed in the account. Together they equal $4,650. Compared with the original $4,000, the $650 difference consists of the $200 realized gain and $450 unrealized gain. Counting the entire $1,200 sale proceeds as profit would also count the $1,000 of purchase cost that was returned.
Cash movement is a third record
Moving the $1,200 from the brokerage account to a bank account changes where the money sits. It does not create another $200 gain. The sale and the withdrawal are separate events.
New deposits need the same separation. An account that rises from $4,000 to $5,000 after a $1,000 deposit has not produced a $1,000 investment return. A balance comparison needs the external cash movements before it can describe performance.
Dividends introduce a further distinction. They are investment income with their own payment records. A holding's price gain alone does not include every dividend paid during the holding period.
Tracking profit and US tax records
Realized tracking profit and a reportable US tax gain can differ. Purchase fees, adjustments, acquisition dates and the particular shares sold affect the records behind a tax result. The IRS explains that capital gain or loss generally compares the amount realized with adjusted basis. This article's one-purchase example does not resolve those details for an actual account.
FinTarget's Trades page records buys and sells and updates holdings. A sale uses the holding's tracking average cost to calculate the profit or loss recorded as income. That calculation is not a complete US tax lot calculation.
A record that keeps the sale quantity, sale proceeds, recorded cost, remaining quantity and statement reference as separate fields makes the example reproducible. A broker's transaction confirmation and tax documents remain separate evidence for the actual transaction.