When buying stock, there is a widespread saying, namely It's not a loss until you sell. This implies that the price at which you bought is relevant. However, I think that once I have bought the stock, it is completely irrelevant at which price I bought (as it is sunk cost). Am I missing something?

A similar claim I often hear in this context is that patience often pays out, and in particular that one should not sell immediately after the price dropped significantly but wait until it recovers. Is this claim somewhat theoretically or empirically backed up or just (possibly wrong) intuition? If it was true, wouldn't that imply a way to "beat the market" by simply buying after the price dropped? I think one problem of that claim is that one does not know, when the price has finished dropping.

So in summary: Is there some truth in the saying It's not a loss until you sell?

7 Answers 7


"It's not a loss until you sell is a rationalization that people use to negate reality.

An UNREALIZED loss results from holding onto an asset after it has decreased in price, hoping that asset price will eventually recover. Selling the stock converts it to a REALIZED loss.

For example, if your 100 shares of a $50 stock goes to $10, you have lost money. You just haven't realized it yet. If you think otherwise, will your broker allow you $5,000 of margin borrowing when the stock is $10? Nope. Even your broker recognizes the LOSS and will base a possible margin loan on the current value of $10.

Or suppose you bought the $50 stock on 50% margin. When it drops below $33.33 and violates the minimum margin requirement of 25%, will your broker say, "No problem mate, it was once worth $50 and there was no LOSS"? I think not.

Making or losing money is based on today's stock price. Realizing that gain or loss occurs when you sell the stock.

Here's an extreme example. Do you think that anyone who bought Enron or Lehman Brothers (and rode it down) says: "I didn't lose money because I didn't sell the stock."?

A more realistic way to think about this is that whenever you buy something, your money is lost (you gave it to someone else). At a later date, you may recover some of it, all of it, or even a profit, when you sell it to someone else who then gives you their money.

  • +1, thanks! And do you think the similar claim about patience (in the question) has some truth in it? Or is there no such general claim possible, since the price usually dropped for a reason?
    – simplemind
    Nov 9, 2019 at 10:05
  • 2
    Patience pays off if you are right. It can be a disaster if you are dead wrong. You should sell when the fundamental reasons for owning a stock change. There are countless stories of people who lost big because they were patient and their stock no longer exists. Nov 9, 2019 at 13:16

Your money is lost when you buy a stock, and gained when you sell it. In the sense that it is no longer liquid or legal tender in exchange for other goods.

You should think of investing in this way so you are only ever willing to invest what could be lost forever (although it is extremely unlikely a diversified investment would lose all or even most of its value)

Historically, yes, the stock market beats inflation. But in ideal settings buying low and selling high is good, and selling before any continued drop and then rebuying is better than holding.

You should remember ITS NOT A GAIN UNTIL YOU SELL IT (and it must be at a higher value than you initially paid)


It’s not a loss until you sell.

In my opinion, thats completely not true. Let me take the example to the extreme. You bought one stock. 1000 shares ABC at $50. Now it’s at $5.

Then you see a new incredible investment. XYZ at $50. Can you still buy 1000 shares of XYZ? no. You can only buy 100 shares. (if you sell the first investment) Otherwise you can’t buy any. Missing out on other opportunities is a loss in itself.

I think what people mean by “it’s not a loss until you sell” is that if you are correct about your stock. Even if the stock went from 50 to 5, if can still eventually recover and go to 500. (though unlikely)

Having an ego like this is dangerous in investing. The only time I advise having this mentality is if you are buying a broad based ETF or mutual fund. Something like SPY and QQQ or vanguard. Buy and hold. I think investing in the general market is an amazing idea, for everyone. The reason is that 95%+ “professional” investors don’t even beat the market. If you want to beat the market, be prepared to dedicate your life to improving your investing skills. Even if you dedicate yourself, 95% chance you won’t succeed. (more than the market)

For individual stock pickers, it’s different because you are actively trying to beat the market.

  • 1
    Most of this answer has nothing to do with the question asked. Nov 9, 2019 at 4:33

Only at most partial truth.

People often use this saying to justify not selling stocks of companies that have lost their competitive advantage. If you hold on to such stocks too long, eventually the companies can go bankrupt, or at least the ownership will change so that creditors will own the company in its entirety due to debt restructuring. So, in that sense, it was a loss before you sold.

However, in some cases the stock price reduces markedly due to apparently no reason at all, or a reason that you don't think is valid.

Price is what you pay. Value is what you get. After the price has reduced, you should analyze if the values has reduced. By previously doing a purchase decision, you probably analyzed that your perception of the value was higher than price. Now it's time to do the analysis again, using all new information you can take into account.

One class of price reducing it due to a general market downturn. In such a case, the reason was that investors' yield demand changed. For example, if stock yield 2% inflation + 2.5% economic growth + 3% dividend = 7.5%, and then suddenly the investors' yield demand changes to require 9% from stocks. Economic growth surely doesn't increase due to investors' yield demand change, and the same is true for inflation. So, the only way for yield to change is by dividend yield increasing from 3% to 4.5%. The mechanism to cause this increase is 1/3 = 33.333% drop in stock prices. If you don't understand this effect, you should NOT invest into stocks, either directly or through a fund. To repeat: even 1.5% increase in investor's yield demand will turn into a 33.333% downturn in stock prices, affecting all stocks in the stock market.

  • "If you don't understand this effect, you should NOT invest into stocks, either directly or through a fund." LOL. I'm sure that there are plenty of people who have made lots of money without understanding that at all. Nov 9, 2019 at 22:15
  • 1
    @BobBaerker Only during a bull market. During a bear market, most people who do not understand this effect exit from the stock market, and miss the returns of the following bull market.
    – juhist
    Nov 10, 2019 at 10:27
  • Who keeps track of the number of people who do not understand this effect, who then exit the market because they do not understand this effect, and because of that exit they then miss the returns of the following bull market? Your source for that data would be ? Nov 10, 2019 at 13:28

Am I missing something?


Any losses -- or gains -- are all (metaphorically, in 2019) just scribbles on a ledger sheet until you actually sell the asset.

That's because you can't spend shares of stock (or bonds, or Beanie Babies, or your house or anything else you buy which you hope will appreciate in the future).

For example, Bill Gates does not have US$106B, he has stock valued at US$106.

Another example: you bought 100 shares of JPM in June 2000 at $55.88/share. In June 2003 and Dec 2008, the value was down below $23/share, but now it's $130/share. At no time, though, could you buy a cup of coffee with those shares.


There is a lot of truth in that, especially where taxes are concerned. You can write off a loss against capital gains and if you don't have any gains, you can reduce your income by $3000 a year until you recover your loss.

Investors will often hold on to an unrealized loss until they have a reason to sell and then it becomes a realized loss.


Re "patience often pays out", do you happen to remember (most recently) 2008-09? Or any other significant stock market decline? If you sold your holdings whenever there was a significant market decline, I doubt that you would be doing very well.

As for whether it's not a loss until you sell, that depends on how you look at it. From the standpoint of doing your (US) taxes, it's generally true that you can't take a loss until you sell (or until the stock becomes worthless), just as you aren't taxed on gains until you sell.

But if you're just tracking your daily portfolio value, then you can think of it as a loss, just as you can think of increasing stock prices as gains. But that's a fluid situation: prices change from day to day, so neither losses nor gains are fixed until you sell.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .