The AI (ChatGPT) Stock Investing Handbook: Paper Loss Versus Realized Loss

Here is the response from ChatGPT for the prompt paper loss versus realized loss entered on January 17, 2023.

A paper loss refers to the decrease in the value of an investment on paper, or on the books, but it has not been sold yet. For example, if you bought a stock at $100 per share and it is now worth $80, you have a paper loss of $20 per share. However, you haven't actually lost any money because the stock has not been sold yet. In this situation, the loss is only on paper.

On the other hand, a realized loss is when an investment has been sold at a lower value than it was purchased for, resulting in an actual loss of money. For example, if you buy a stock at $100 per share, and then sell it at $80, you have a realized loss of $20 per share.

It's important to keep in mind that a paper loss can become a realized loss if the investment is sold at a lower value than it was purchased for. So, it's important to have a clear plan for managing your portfolio and to stick to it, rather than making decisions based on emotions or short-term fluctuations.

It's also important to have a long-term perspective and not to let short-term paper losses affect your investment decisions. It's also important to consult with a financial advisor before making any investment decisions and to be aware of the potential for stock price bubbles, and to avoid engaging in magical thinking when it comes to investing.