Capital Gains

A capital gain is the profit you make by selling an investment for more than you paid for it. Simple concept: buy low, sell high, and the difference (before any fees or taxes) is your capital gain. If you sell for less than you paid, that's a capital loss instead.

Here's what that looks like with real numbers.

Buy: 10 shares × $40 = $400
Sell later: 10 shares × $55 = $550

Capital gain: $550 − $400 = $150

A capital gain only becomes real, or "realized," once you actually sell. Before that, a rise in a stock's price is just an "unrealized" gain — it's real on paper, but can still go up or down before you ever sell. Selling locks the gain, or loss, in.

Profit made by selling an investment for more than you paid for it is called a ____.

You buy a share for $30 and its price rises to $45, but you don't sell. What is this called?

Selling an investment for less than you paid for it results in a capital gain.