Realized vs unrealized gains: why 'up 20%' can mean four things

"I'm up 20%" is doing a lot of work in most conversations. Up on what you currently hold? Including the stuff you sold at a loss and stopped counting? Let's split it.

This isn't pedantry. The gap between the flattering version of your return and the complete version is usually the single most informative number in your portfolio, because it measures how much of your track record you've been quietly editing. Splitting one vague "up" into its four components takes about a paragraph each, and once you've seen the split you can't unsee it, which is rather the point.

The four numbers hiding in one

Unrealized gain: current holdings versus what they cost you. Paper profit, real until the next open, revisable forever.

Realized gain: profit and loss you actually locked in by selling. This one's permanent, and it's where selective memory goes to work, the GameStop-era experiments, the "temporary" leveraged ETF, the SPACs. Sold, regretted, deleted from the mental ledger.

Dividends: cash received. Weirdly often left out of "am I up" math entirely.

Fees: the guaranteed negative return. Never forgotten by your broker, only by you.

Your true result is all four together, measured against everything you ever put in, not just the survivors in your current portfolio.

The two quiet ones deserve a moment. Dividends get omitted from "am I up" arithmetic for a mundane reason: they arrive as cash, get spent or reinvested, and leave no trace on the position screen where people do their mental accounting. For an income-tilted portfolio, ignoring them can understate your result by a meaningful margin, the one form of selective memory that works against you. Fees have the opposite problem: each one is too small to notice and the total is too annoying to add up, so nobody does. A tracker that sums them from your transaction history does the adding for you, which is less fun than it sounds and more useful.

A worked example: 20% or 9.35%?

Put numbers on it. Suppose you've deposited €20,000 with your broker over the years. Your current holdings cost €14,000 and are worth €16,800 today. The positions screen says +20%, and the positions screen is not wrong, it's just answering a small question.

Now add the rest of the ledger. Unrealized gain on open positions: +€2,800. Realized losses from the positions you closed and stopped mentioning: −€1,200. Dividends received along the way: +€450. Fees paid: −€180. Net result: +€1,870 on €20,000 of deposits, which is +9.35%.

Both numbers are true. One describes the survivors; the other describes your investing. The €2,800 headline and the €1,870 reality differ by exactly the items the standard broker screen doesn't show, and notice that no single missing item was large. Selective memory rarely works in dramatic sums; it works €1,200 at a time.

If your own version of this exercise requires guessing at the realized column, that is itself the finding: the record exists in your broker's transaction history, you've just never totaled it. Which is fixable in an afternoon, or in a minute with the right upload.

Survivorship bias, self-inflicted

Brokers mostly show unrealized P/L on current positions. Close a losing position and it vanishes from view, the app forgets it for you. A portfolio of winners with a graveyard of realized losses looks identical to actual skill, unless something keeps the graveyard visible.

This is the same statistical trap that makes fund industry averages look better than fund investors' results, funds that die are removed from the record, applied voluntarily to your own account. Nobody decides to do this. It's simply that the interface shows open positions, human memory prefers wins, and the two reinforce each other until the story and the ledger part company. The correction isn't discipline or self-criticism; it's a data source that doesn't forget, which is what your full transaction history is.

Why realized losses sting more, and why that matters

There's a reason the graveyard gets buried. An unrealized loss still contains hope: it might come back, and until you sell, no mistake has officially been made. Realizing it converts an open question into a verdict. The well-documented result is that investors sell winners too early, to bank the pleasant kind of certainty, and hold losers too long, to postpone the unpleasant kind. Which means the realized column tends to fill with small banked wins while the big losses sit unrealized in the open positions, politely labeled "long-term holdings".

Separating realized from unrealized in your own records is how you catch this pattern in yourself. If your realized column shows forty modest wins and your open positions include three large paper losses from 2021, that's not a portfolio, that's the disposition effect wearing a portfolio costume.

Paper gains are real, just revisable

The opposite mistake deserves a word too. "It's only a paper loss" and "it's only a paper gain" are both half-truths. Unrealized numbers are genuinely your wealth, marked at today's prices, you could realize them within minutes of the next market open. What they aren't is settled. Treating a paper gain as spendable income and treating a paper loss as not-really-a-loss are the same error with different signs: confusing today's mark with a final score.

The clean mental model: unrealized P/L tells you where you stand, realized P/L plus dividends minus fees tells you what has actually happened so far. You need both, and you especially need them kept separate.

The tax line in all this

In most countries, selling is the taxable moment: realized gains create a bill, realized losses can often offset it, and unrealized gains ride along untaxed until you sell. That gives the realized/unrealized split legal weight, not just psychological weight, and it's why year-end tax planning is mostly an exercise in deciding what to realize. Some systems work differently, the Netherlands taxes a notional return on your portfolio's January 1 value rather than your actual gains, we've covered what that means for your January 1 number separately. Either way, the bookkeeping habit is the same: know which of your gains are locked in and which are still weather.

One caution: tax rules are jurisdiction-specific and change with depressing regularity, so treat any tracker's realized-gains figure, ours included, as performance bookkeeping, and check the filing math against your broker's official tax report and local rules before it goes on a return.

What one honest screen looks like

The fix is one screen that shows: open positions with unrealized P/L, a closed positions list with realized results (yes, including the 2021 souvenirs), dividends received, and total fees paid. BullBenchmark builds exactly that from your full transaction history, the whole story, not the highlight reel. The first look stings. It's also the honest baseline every real improvement starts from.

The baseline matters because the next question is comparative: given everything, realized, unrealized, dividends, fees, did you beat the boring alternative of an index fund? That's a separate calculation with its own pitfalls, covered in why you should benchmark your portfolio, but it's unanswerable without the complete ledger this article is about. You can't benchmark the highlight reel; the index, annoyingly, remembers everything.

The first week of BullBenchmark is free, no card, upload the export you just downloaded and see where you stand.

Related: Average cost basis explained