Capital Gains

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Everyone would like to make money in the stock market. Right? Well, any money or profit you make after selling an investment is referred to as capital gains.


To calculate your capital gain is simple. It is the sale price (price you sell it for) minus the purchase price (price you bought it at). In the case that you calculate your capital gain and you get a negative number, that would indicate a capital loss. A loss would mean you lost money on the investment.


Capital Gain/Loss = Sale Price - Purchase Price

  

A gain or increase in price is only called a capital gain once the investment has been sold. Another word investors use for a capital gain is a realized gain. It is realized because you sold the investment and locked in the cash. 


If you decide to hold the investment longer, the gains are considered unrealized since your money is still in the stock and not in hand. 


Capital gains have two different classifications: long or short-term. Long-term infers that an investor held the investment for more than one year before selling, while a short-term is held less than one year before selling. 


Who cares about this classification? Well it matters when we get to taxes, which we will be discussing in the next Bite. 


Sweet, I hope you gained something of value from that. Let's move on to taxes on investments.

Source: Investopedia | Capital Gain

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Disclosure: Alpaca does not make recommendations with regard to fractional share trading, whether to use fractional shares at all, or whether to invest in any specific security. A security's eligibility on the list of fractional shares available for trading is not an endorsement of any of the securities, nor is it intended to convey that such stocks have low risk. Fractional share transactions are executed either on principal or riskless principal basis, and can only be bought or sold with market orders during market orders.
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This is not an offer, solicitation of an offer, or advice to buy or sell securities, or open a brokerage account in any jurisdiction where Alpaca is not registered (Alpaca is registered only in the United States).

View Alpaca's disclosures at: https://alpaca.markets/disclosures

Alpaca does not make recommendations with regard to fractional share trading, whether to use fractional shares at all, or whether to invest in any specific security. A security’s eligibility on the list of fractional shares available for trading is not an endorsement of any of the securities, nor is it intended to convey that such stocks have low risk. Fractional share transactions are executed either on a principal or riskless principal basis, and can only be bought or sold with market orders during normal market hours.

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