What Is Capital Gain?

In this series, we get to the bottom of investing definitions.

Previously, we looked at what “dividend yield” means. Now, let’s tackle the term “capital gain”.

So, what is capital gain?

Capital gain represents the profit someone earns on the sale of an asset, such as a stock investment. 

In other words, it’s the difference between the selling price (higher) and buying price (lower) of the asset.

For example, let’s say I bought a stock at $2 and sold it at S$2.50, the capital gain (also known as the profit) I receive is S$0.50.

(Note: If I don’t sell the stock at S$2.50, the S$0.50 only represents a paper gain since the gain has not been realised.)

In Singapore, we are fortunate as we don’t have to pay tax on capital gains from sales of shares:

It’s not the same case in all countries though.  

Stay tuned for more in the “What Is” series!

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