Fund Operations & NA
Realised and Unrealised P&L
Learning Outcome
5
Calculate realized and unrealized P&L with simple examples.
4
Compare the characteristics of realized and unrealized profit or loss.
3
Understand how unrealized P&L impacts portfolio value and NAV.
2
Identify when a profit or loss becomes realized.
1
Explain the difference between realized and unrealized profit or loss.
Realised Profit/Loss
Realised profit or loss, is the gain or loss that becomes final the moment the fund actually sells the security. Once sold, the amount of profit or loss is locked in — it no longer changes, regardless of what happens to the security's price afterward.
Unrealised Profit/Loss
Unrealised profit or loss on the other hand is the gain or loss on a security the fund still owns. It is simply the difference between what the security is currently worth in the market and what the fund originally paid for it. Because the fund has not sold the security, this gain or loss is not final — it is a paper figure that moves up or down every day the market price changes.
Realised vs Unrealised Profit/ Loss
Simple Examples
1. Realised Profit/Loss — Numerical Example
Horizon Balanced Fund buys 1,000 shares at ₹250 each and later sells all of them at ₹275 each.
Step
Detail
Shares bought
Buy price
Total cost
Sell price
1,000 shares
₹250 per share
1,000 × ₹250 = ₹2,50,000
₹275 per share
Total sale value
Realised Profit
1,000 × ₹275 = ₹2,75,000
₹2,75,000 − ₹2,50,000 = ₹25,000
2. Unrealised Profit/Loss — Numerical Example
Horizon Balanced Fund buys the same 1,000 shares at ₹250 each, but does not sell them. The market price later rises to ₹275 per share.
COUNTRY
INDIA
US
INDIA
US
Step
Detail
Shares bought
Buy price
Total cost
Sell price
1,000 shares
₹250 per share
1,000 × ₹250 = ₹2,50,000
₹275 per share (shares still held, not sold)
Current market price
Unrealised Profit
1,000 × ₹275 = ₹2,75,000
₹2,75,000 − ₹2,50,000 = ₹25,000
Since the shares are still held, this ₹25,000 is only a paper gain — it will keep changing and only becomes final if and when the shares are actually sold.
Summary
5
Helps ensure accurate valuation and reporting.
4
Unrealized P&L impacts portfolio value and NAV until sale.
3
Realized P&L is final; unrealized P&L fluctuates with market prices.
2
Unrealized profit or loss exists while the security is still held.
1
Realized profit or loss occurs when a security is sold.
Quiz
When does a realized profit or loss occur
A. When the market price changes
B. When the security is sold
C. When the security is purchased
D. When NAV is calculated
Quiz-Answer
When does a realized profit or loss occur
A. When the market price changes
B. When the security is sold
C. When the security is purchased
D. When NAV is calculated
