Future Business Leaders of America (FBLA) Securities and Investments 2025 – 400 Free Practice Questions to Pass the Exam

The term 'capital gain' specifically refers to the increase in an asset's value above its purchase price. This occurs when an asset, such as stocks or real estate, is sold for more than the amount it was initially bought for. This increase in value is a key consideration for investors because capital gains can significantly impact overall investment returns. When an individual sells the asset, the difference between the sale price and the original purchase price is considered the capital gain.

In the context of investing and personal finance, understanding capital gains is important as they are often subject to taxation. Different types of capital gains—long-term and short-term—are taxed at different rates, which can affect an investor’s strategy regarding when to sell an asset. Recognizing capital gains is a fundamental concept for future business leaders and investors, making it crucial to differentiate from other financial terms related to investments.