Capital gains are profits that arise when the value of an investment increases. You achieve a capital gain when you sell an investment for a higher price than you originally paid. The difference between the purchase price and the selling price is the gain.
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A capital gain arises from an increase in the market price of your investment.
As long as you hold a share or another investment, its value may change, but the gain is not yet final. Only when you sell is the capital gain realised. 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 €15 difference per share is your capital gain.
If the price had fallen to €25 and you had sold, you would have incurred a capital loss of €5.
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