REALIZED GAINS AND LOSSES FOR DUMMIES
When you start buying stocks for the first time, you may feel like a dummy because there are so many stock market buzzwords and terms. This post is about realized gains and losses and are they something you should pay attention to?
Whenever you login to your online stock market broker account, there are a lot of tabs and choices you can make. If you go to your account there are many things you can pull up and one of them is the list of your holdings. That will show you a list of the stock you own along with their gain or loss for the day and other data. This is where each online broker is a little different because you may see slightly different things for the different brokers.
One of the tabs that should be somewhere on your account page is one that says something like “gains & losses”. You can see an example of what it looks like in and E*Trade account below:
When you click on that gains and losses tab you will be taken to a screen that will show you your realized gains and losses for any time period they have in their data banks. Whatever you have realized means that you have bought stock, subsequently sold the stock (or part of it), and have either a gain or loss for the transaction. That “realized” amount, and it doesn’t matter whether it is negative or positive, will need to be reported on your tax returns.
There is also a section for unrealized gains and losses but in most cases that just takes you back to your active portfolio as everything in there has not been sold and you don’t have any reportable income or loss yet.
Realized gains and losses are reportable to the IRS and failure to do so can get you in loads of trouble. Your online broker is required to report all your sells to the IRS and you have to be able to report how much you made or lost on each transaction (see stocks for beginners and taxes). There are no exceptions and your losses can be offset with gains but nevertheless, everything has to be reported.
When you are learning how to invest in stocks, these types of words and phrases are often confusing because there are so many of them. Many of them though, are exactly what they sound like and realized gains and realized losses are one of them.
