What is the difference between a capital gain and a capital loss?

What is the difference between a capital gain and a capital loss Introduction: The Foundation of Investment Hello and welcome to our video on capital gains and capital losses. When it comes to investing, understanding these concepts is crucial. They not only impact your financial returns but also have implications for taxation. So, let's dive in! Defining Capital Gains and Capital Losses At its core, a capital gain refers to the profit you make when selling an asset, such as stocks, real estate, or even artwork, at a higher price than what you initially paid for it. On the other hand, a capital loss occurs when you sell an asset at a price lower than its purchase price, resulting in a financial loss. Realizing Gains and Losses: The Importance of Timing The timing of when you buy and sell an asset is crucial. If you sell an asset within a year of purchasing it, any gain or loss is considered short-term. However, if you hold onto the asset for more than a year before selling, it is classified as a long-term gain or loss. Why does this matter? Well, the tax treatment for short-term and long-term gains/losses can differ significantly.