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What Is Capital Gain?

profileSudhan P
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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”.

Source: giphy

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:

Source: Inland Revenue Authority of Singapore

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

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

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About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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