Mark to market

Valuing an asset at what it would sell for right now, rather than at what you originally paid for it.

Example

A brokerage statement showing a stock's current price, not its purchase price.

Important

A mark-to-market loss is only 'real' once you sell - but ignoring it entirely is also how people hold on to a genuinely broken investment for too long.

Related terms

• Volatility — How much and how often an asset's price moves, up or down, over a given period.
• Permanent loss of capital — Money that is gone for good - the business failed, the asset became worthless, or it was sold at the bottom and never bought back.

Lessons that explain it

• Most alternative assets pay you nothing until the day you sell — Art, wine, watches and domains produce no income at all while you hold them - the return exists only as a price someone else agrees to pay later. A small minority of alternatives, like farmland and royalty rights, are genuinely different because they generate cash along the way. (9 min)
• For most alternatives, the entire return is one number: the exit price minus everything paid to get there — Without a dividend or a coupon, appreciation is the whole story for art, wine and watches - and it only becomes real at an actual sale. Farmland and royalty interests instead compound the way an income-producing asset does, cash paid out year after year. (11 min)
• A paper gain is a price someone paid once, not money you have — Private positions are usually marked at the last round price, adjusted for dilution. That mark is an estimate that can lag reality, and only a sale or distribution turns it into cash. (10 min)
• A loan's rate is a stack: base rate, expected loss, illiquidity and fees — Private loans are priced by building up from a risk-free rate, adding compensation for defaults, for being unable to sell, and for the intermediary. Values between lending and repayment are mostly estimates. (11 min)
• No closing bell: comparables, appraisal and the cap rate — Nothing quotes this asset. Its price comes from three negotiated sales that happened months ago, adjusted by somebody's judgement - and from an income lens that is more honest and much less popular. (11 min)
• Realised and unrealised: a mark is not money — An unrealised gain is somebody's opinion of what an asset would fetch. A realised one is what it did fetch. The distance between them is where a great many returns go to die. (10 min)

All 578 terms in the Investing glossary