When you sell a stock at a higher price than what you paid for it, you make a profit. The financial term for that profit is called a capital gain.
“Capital” refers to the money you use for investing — the money you start with. The “gain” portion of capital gain refers to the money you earn on your investment if you sell the stock for a profit. If you lose money on the sale of your stock, then the term is called a capital loss.
These are good words to remember. Just imagine when the time comes to sell an investment — like a stock or a mutual fund — for a profit…You can very proudly say, “I had a capital gain!” Cool, huh?
Click the Next button to continue.