How stocks pay you
Capital gains: buying low, selling higher
3 min
There are exactly two ways a stock can make you money. The first is the capital gain — selling a share for more than you paid for it.
How a capital gain works
If you buy a share for R$ 20 and later sell it for R$ 26, your capital gain is R$ 6 per share (before costs and taxes). The same idea applies in dollars on US exchanges.
It is worth stressing two points:
- The gain is only realized when you actually sell. Until then it is a paper (unrealized) gain that can still evaporate if the price falls.
- The reverse exists too — selling below your purchase price is a capital loss.
What drives the price up over time
Over the long run a share price tends to follow the company's growing profits and value. Over the short run it reacts to earnings reports, economic news, interest-rate changes and sentiment. This is why long-term investors focus on the business and try to ignore daily noise.
A note on costs and tax
Capital gains are usually taxable, and the rules differ by country (and in Brazil there are specific rules and exemptions for stock sales depending on the monthly amount sold). Brokerage costs also nibble at your gain. Always factor both in — a "profit" before costs and tax is not the profit that reaches your pocket. We keep tax detail light here; treat it as something to confirm for your own situation.
This content is for educational and informational purposes only and is not investment, financial, tax or legal advice. Trading and investing carry risk, including the possible loss of capital. Any performance shown by third-party tools is hypothetical and not a promise of future results. Do your own research and consider professional advice before making any decision.