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Finance: What is a Realized Gain or Loss? 2 Views
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Description:
When you realize a gain or loss, it means that you turn an investment into cash. Thrilling, we know.
- Social Studies / Finance
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- Life Skills / Finance Definitions
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Transcript
- 00:00
finance a la shmoop what is a realized gain or loss hey whoa whoa yes those are
- 00:11
all the sounds of realization oh and golly gee willikers yes that too well [Man looking surprised]
- 00:17
when you realize a gain or loss it means that you've turned an investment into
- 00:22
cash if your investment has been profitable then you've realized a gain [Cash stacks landing on each other]
- 00:27
and goes the other way too if you've made an unwise investment and are now [Man placing bets on roulette table]
Full Transcript
- 00:32
living in a van down by the river well then you probably realized a loss and
- 00:36
you probably also realized the importance of owning real estate that [White van moving into river]
- 00:40
doesn't roll why is it important to understand realized gains and losses
- 00:44
rhymes with shmaxes well the government at least thus far does not tax Americans
- 00:49
on the assets they have rather it taxes them only when they convert those assets
- 00:55
into cash assets like stocks bonds real estate appreciated crayon drawings that
- 01:02
got sold on eBay for a big price if someone pays you cash then its taxable [eBay crayon listing appears]
- 01:06
the idea being that an investment in a vacuum by itself isn't all that useful
- 01:11
like owning shares in a private company that's probably worth a lot more but may
- 01:16
or may not be worth anything later when you go to sell it or even if that
- 01:19
company's public you own a lot of shares in it well until you turn them into cash [Shares transform into cash]
- 01:23
nothing is certain because even public companies can go down a whole lot in
- 01:27
value so the government keeps its sticky paws off of those things things that are
- 01:32
just investments and only comes a-knockin when the investments are
- 01:35
converted into cash and you know that cash can be used to do stuff like buy [Investment assets transform into pile of cash]
- 01:40
cars and pay tuition and rent and get the occasional multicolored water slide
- 01:45
for the front entryway one big double yellow line on the highway is crossed [Car driving along highway]
- 01:48
after one year that is when you've made an investment and held it for at least a
- 01:53
year and then you go to sell it well you generally get a lower tax rate
- 01:57
applied to you then you would have had you held that investment less than a
- 02:02
year why well if you're holding it a year the government wants to reward you [Man holding stocks]
- 02:06
and it makes the markets more stable when you hold the investments
- 02:10
long period of time so they give you a tax break by encouraging people to marry
- 02:13
investments holding them many years instead of just dating them for a few [Man at altar with investment bride]
- 02:17
weeks while one goal the politicos have is to create a more stable predictable
- 02:21
investment climate it makes a lot of sense all right and predictable is good
- 02:25
like a pun at the end of a shmoop video oh we barely got one in there [Man sitting on a bench and bear appears]
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