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What are capital gains?
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Capital gains are profits that arise because the value of an investment increases. You achieve a capital gain when you sell an investment for a higher price than you originally paid for it. The difference between the purchase price and the selling price is the profit.
A capital gain arises from an increasing market price of your investment.
As long as you own a share or other investment, the value may change, but the profit is not yet final. Only when you sell does the capital gain become realized. Capital gains can occur with shares, bonds, real estate and other investments. They differ from dividend or interest because those forms of income are paid out without you having to sell the investment.
Short example:
Suppose you buy a share for €30. After some time, the price rises to €45 and you decide to sell. The difference of €15 per share is your capital gain.
If the price had fallen to €25 and you had sold, you would have incurred a €5 capital loss.
Disclaimer: Investing brings risks. Our analysts are not financial advisors. Always consult an advisor when making financial decisions. The information and tips provided on this website are based on our analysts' own insights and experiences. Therefore, they are for educational purposes only.
