Knowing what is capital gains is very important if you are a serious investor. In this page, let us find out the meaning and definition of capital gains and capital loss. If you are investing in stocks, mutual funds and real estate, you may never know the tax advantage if you held your property for a longer period of time.
According to the book “Build Your Own Mutual Fund”,
“A capital gain is appreciation in the value of an asset – that is, when the selling price is greater than the original price at which the security was bought. The tax rate on capital gain depends on how long the security was held. Studies show that personal portfolios are much easier, tax-wise, when it comes to declaring capital gains, than are mutual funds” 1
Reference: 1 Brian O’Connell, Author, Build Your Own Mutual Fund: How to Use a Personal Portfolio to Take Control of Your Financial Life, 2004 by Adams Media, Avon Massachusetts, USA. ISBN: 1:58062-930-X, page 234
In investing, you need to continue learning and growing. By simply knowing the financial and investment terms, you can increase your vocabulary.
Capital gains in stocks is simple. If you buy company Stock A for a price $100 and sell if for $120 after few months, then, there will be a capital gains or capital appreciation made. It is also applicable in mutual fund investing and real estate investing.
Now, you know what is capital gains all about. Read other financial terms in the similar post section. Do not forget to share this with your friends. If you have your own definition, just leave it in the comment box.