In plain words: A profit from the sale of property or an investment.
A capital gain is the profit you make when you sell something for more than you paid for it. If an asset is bought at one price and later sold at a higher one, the difference is the gain. It is one of the two main ways an investment can reward an owner.
How is a capital gain different from income?
A capital gain only appears when you actually sell, so it differs from regular income like interest or a dividend, which arrives while you still hold the asset. Until you sell, any rise in value is only "on paper" and can still disappear if prices fall again.
What about losses and tax?
The mirror of a gain is a capital loss, which happens when you sell for less than you paid. In many places, realised capital gains may be taxed, with rules that vary by country and asset type. Tax treatment is a factor worth understanding, though specifics depend on local law.
Key takeaways
- A capital gain is the profit from selling an asset above its purchase price.
- It is only realised when you actually sell, unlike ongoing income.
- Gains can be taxed and may turn into losses if prices fall.