What are realized losses?

Realized losses occur when an investment is sold for less than its original purchase price. Essentially, it's when the loss is "realized" or made actual at the point of sale. For example, if you buy an asset for $100 and its value drops to $80, you experience a $20 unrealized loss while you still hold the asset. But if you sell it at $80, that $20 loss becomes a realized loss as you've effectively locked in that decrease in value 1.

In contrast, unrealized losses remain on paper until the asset is sold. They are potential losses that become actualized only upon the sale of the asset 1 2.