What does capital gain refer to?

Capital gain refers to an increase in the price of an asset, which occurs when the asset is sold for a higher price than it was purchased. This difference between the selling price and the purchase price represents the profit earned from the investment. Understanding capital gains is essential for investors and those involved in retirement planning, as it affects overall investment returns and tax liabilities.

When an asset appreciates in value, it signifies that the investor has the potential to realize a profit if they decide to sell. This concept is central to investment strategies, as many investors seek to build wealth through capital appreciation over time. In retirement plans, capital gains can contribute significantly to an individual's portfolio growth, especially when considering long-term investments such as stocks or real estate.