Define: Paper Profit

Business, Legal & Accounting Glossary

Definition: Paper Profit



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Full Definition of Paper Profit


A paper profit is an unrealized gain on a security or asset.

For example, suppose 10 shares of Acme stock are bought at $8 and two months later the stock is selling at $12. The paper profit is (10X12)-(10X8), or $40. If the stock was sold, the paper profit would become a realized profit. A paper profit is just that – a profit on paper only – and should never be confused with a tangible gain. First, a paper profit is usually reduced significantly by both taxes and transaction costs upon realization. Moreover, a paper profit can become an important psychological obstacle to successful investing. Suppose Acme falls back to $10 and part of the paper profit disappears. Some investors will find it hard to sell the shares until they climb back to $12 and the full paper profit re-emerges. In this way, an historical paper profit can make an investor hold a stock too long and forego better investment opportunities.


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https://payrollheaven.com/define/paper-profit/
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Paper Profit. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. April 06, 2020 https://payrollheaven.com/define/paper-profit/.
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Paper Profit. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/paper-profit/ (accessed: April 06, 2020).
American Psychological Association (APA):
Paper Profit. PayrollHeaven.com. Retrieved April 06, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/paper-profit/

Definition Sources


Definitions for Paper Profit are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 6th February, 2020