Until an asset is sold, profit or loss exist only in the portfolio statement. Paper profit becomes actual profit when the position is closed — and until that moment it can either increase or disappear.
The distinction matters for two reasons. First, paper profit cannot be spent, and major spending decisions based on a grown portfolio are risky. Second, psychologically a paper loss often prevents an investor from selling a weak asset: while the position is open, the loss seems unfixed, although economically it has already occurred.
For bonds, paper revaluation has a special feature: if an investor intends to hold the security until maturity and the issuer fulfills its obligations, an intermediate price decline does not affect the final result — it is determined by the yield fixed at purchase. For stocks, there is no such built-in mechanism to return to par value.