Capital Gain

Glossaries

Term	Definition
Capital Gain	The profit realized from selling an asset for more than its purchase price A capital gain refers to the profit you make when you sell an asset for more than you paid for it. This can apply to various assets, including: Stocks: When you buy a stock at a certain price and later sell it for a higher price, the difference is your capital gain. Real estate: If you buy a house for $200,000 and sell it for $250,000, your capital gain is $50,000. Collectibles: Selling a rare stamp for more than you bought it for would also result in a capital gain. Key points to remember: Realized vs. unrealized gains: A capital gain is only considered "realized" when you actually sell the asset. Until then, any increase in value is just an "unrealized gain" and doesn't count towards your taxable income. Taxes: Depending on your location and how long you held the asset, capital gains may be taxed at different rates than your ordinary income. Short-term vs. long-term gains: In many countries, capital gains are taxed differently depending on how long you held the asset before selling it. Holding an asset for longer than a certain period (usually one year) typically qualifies for lower tax rates. Here are some additional things to consider: Investment strategies: Some investment strategies aim to maximize capital gains by buying and selling assets frequently. Risk and reward: Capital gains can offer significant potential returns, but they also come with the risk of losses if the asset's value decreases. Diversification: It's important to diversify your portfolio to manage the risk associated with capital gains.

Term

Definition

The profit realized from selling an asset for more than its purchase price

A capital gain refers to the profit you make when you sell an asset for more than you paid for it. This can apply to various assets, including:

Stocks: When you buy a stock at a certain price and later sell it for a higher price, the difference is your capital gain.
Real estate: If you buy a house for $200,000 and sell it for $250,000, your capital gain is $50,000.
Collectibles: Selling a rare stamp for more than you bought it for would also result in a capital gain.

Key points to remember:

Realized vs. unrealized gains: A capital gain is only considered "realized" when you actually sell the asset. Until then, any increase in value is just an "unrealized gain" and doesn't count towards your taxable income.
Taxes: Depending on your location and how long you held the asset, capital gains may be taxed at different rates than your ordinary income.
Short-term vs. long-term gains: In many countries, capital gains are taxed differently depending on how long you held the asset before selling it. Holding an asset for longer than a certain period (usually one year) typically qualifies for lower tax rates.

Here are some additional things to consider:

Investment strategies: Some investment strategies aim to maximize capital gains by buying and selling assets frequently.
Risk and reward: Capital gains can offer significant potential returns, but they also come with the risk of losses if the asset's value decreases.
Diversification: It's important to diversify your portfolio to manage the risk associated with capital gains.