Investor Glossary-paper profitInvestor Glossary-paper profitInvestor Glossary-paper profitInvestor Glossary-paper profitInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Paper Profit

The HTML to link to this page
 

A paper profit is a unrealized gain on a security or asset. For example, suppose 10 shares of Acme stock are bought at $8 and two months later the stock is selling at $12. The paper profit is (10X12)-(10X8), or $40. If the stock was sold, the paper profit would become a realized profit. A paper profit is just that - a profit on paper only - and should never be confused with a tangible gain. First, a paper profit is usually reduced significantly by both taxes and transaction costs upon realization. Moreover, a paper profit can become an important psychological obstacle to successful investing. Suppose Acme falls back to $10 and part of the paper profit disappears. Some investors will find it hard to sell the shares until they climb back to $12 and the full paper profit re-emerges. In this way, an historical paper profit can make an investor hold a stock too long and forego better investment opportunities.



Rate this paper profit definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: implied volatility, EBITDA, minority interest, VIX, class C shares, 1035 exchange, real GDP, 401a, labor relations, per diem, required rate of return, reverse mortgage, stock market close, inflation, LIBOR, margin rate, 144a, debt service coverage, diluted share, in escrow, dividends payable, retained earnings, option premium, Key Rate Duration, quality assurance, FTSE, liquidity ratio, irrevocable trust, command economy, deferred revenue, wholly-owned subsidiary, cancelled check, covered put, average price per share, APR, Zero Cost Collar, 1031 exchange, current ratio, FICO score, balance sheet, annual return, stock split, deferred tax, ex-dividend date, phantom income, ex-dividend, open position, risk management, limit order


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use