Part 21: Capital Gain

In the world of investing, you often hear terms like “capital gain.” But what exactly does it mean, and why is it so important for investors to understand? In this post, we’ll break down capital gains and explore how they work.

What Is a Capital Gain?

Simply put, a capital gain is the profit you make from selling an asset for more than you paid for it. This applies to a wide range of assets, not just financial instruments. Think of it this way: if you buy a house for $100,000 and later sell it for $150,000, you’ve made a capital gain of $50,000 (ignoring any transaction costs for simplicity). The same principle applies to investments like stocks, bonds, real estate, or even collectibles.

For example, if you purchase 10 shares of Company Y at $10 each, your total investment is $100. If you later sell those 10 shares when the price has risen to $15 each, your total sale proceeds are $150. Your capital gain in this scenario is $50 ($150 – $100).

Realized vs. Unrealized Capital Gains

It’s important to distinguish between two types of capital gains:

• Unrealized Capital Gain | This refers to the increase in value of an asset that you still own. For instance, if you bought a stock for $50 and its current market price is $70, you have an unrealized capital gain of $20 per share. This gain only becomes “real” when you sell the asset.
• Realized Capital Gain | This is the profit you’ve locked in by selling an asset. Once you sell the stock for $70, that $20 profit per share becomes a realized capital gain.

Why Do Capital Gains Matter?

Capital gains are a primary way investors earn returns from their investments, particularly in growth-oriented assets like stocks. They represent the appreciation in value of your investments over time, contributing significantly to your overall wealth accumulation.

As of August 2025, in the Republic of Armenia, capital gains are not subject to taxation.

Capital Gains and Investment Strategy

Investors often aim for capital gains by investing in assets they believe will appreciate in value. This could be stocks of companies that are expected to increase in price or properties in developing areas. However, seeking capital gains always comes with risk. There’s no guarantee that an asset will increase in value, and you could just as easily experience a capital loss if you sell for less than you paid.

It’s important to remember that investments are subject to market fluctuations and carry inherent risks. Consider your financial goals and risk tolerance before investing.

Apricot Capital is regulated by the Central Bank of Armenia.

The examples in this text are for illustrative purposes only. This does not constitute investment advice or a recommendation to buy or sell any specific investment instrument. The past performance mentioned in this text is not indicative of future results.