Capital gains

A capital gain is the profit made when an investment is sold for more than what was paid for it. A gain is unrealized while the investor still holds the position, since the profit only exists on paper, and becomes a realized gain once the position is actually sold.

Realized capital gains are typically subject to capital gains tax, and many tax systems apply a lower tax rate to gains on investments held for longer than a year compared to shorter-term trades, which is one reason long-term investing can be more tax-efficient than frequent trading.