Uploaded June 2020 | Updated September 2026, 13 minutes ago

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Perhaps now more than ever, with equities going from euphoric highs to panic crashes and then dramatic recoveries, it makes sense to understand the concept of paper profits and paper wealth to use more colloquial expressions or to be more precise, the distinction between realized and unrealized gains.


To put it differently, one of the top mistakes investors/traders make is believing they're wealthier than they actually are due to the fact that at a certain point in time, certain assets or even their entire portfolio are doing great.



However, nothing is set in stone until you realize gains, which is something most people aren't exactly good at. Instead, they let paper profits/wealth trick them into thinking everything will be great and lead them to reckless decisions such as implementing lifestyle upgrades on the basis of this newly found wealth.


Don't do that... just don't.


Please understand that unrealized gains are misleading and stories involving investors or traders who thought they were invincible but ended up back where they started or worse unfortunately abound :(