Paper gains refer to unrealized profits that exist on paper but have yet to materialize into tangible profits . For instance, if you buy a stock for $100 and it eventually increases in price to $120, that represents an unrealized $20 gain on paper - and potentially could become real gains when realized later on. Paper gains can be very exciting as they reflect potential real profits; however, they can also be deceptive as they don't always accurately reflect reality - for instance if the stock market crashes and your stock looses half its value, any paper gains you had will vanish immediately.
Paper gains can be an excellent way of tracking the performance of your investments and evaluating their viability, but they should always be seen as being only an approximat reflection of reality .