Based on the past performance of S&P 500, the average annualized return is around 10%. Does it mean that I will need to realise it when there is a 10% gain? Please advise, many thanks!

Nope, this is just a long-term historical average returns of the S&P 500. Some years it can go down 20% or more, while other years it can return 25%. Smoothing everything out over a few decades gives you about 10% returns :)

Average annualized return is around 10% means based on historical trends, this is what you will earn if you were to hold it for 1 year. It doesn't mean you'd have to realise it. Theoratically, if you hold it for the next year, your Y1 return will then rise to 20% with your Y2 return being 10%.

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But usually S&P 500 is a long term investment instrument where you only realise your profits during rainy days.