Imagine you’ve invested in a stock, and its market price rises after some time. This makes you feel positive about your good investment, and now you want to see how much it has grown.
Using a capital gains yield calculator, you can quickly determine the percentage increase from the original purchase price, helping you measure the success of your investment.
This approach ensures a clear snapshot of your stock’s performance, excluding dividends or other income.
Capital Gains Yield Definition
Capital gains yield is the percentage increase in the value of an investment over a specific period. It’s one of the key metrics for understanding your investment’s performance.
Capital Gains Yield Formula
Here’s the formula to calculate it:
Capital Gains Yield = (Current Price - Original Price) / Original PriceWhere:
- Current Price: The current market price of the stock.
- Original Price: The original purchase price of the stock.
This formula expresses the yield as a percentage.
Capital Gains Yield Example Calculation
For instance, if you purchase a stock at $500 and its price rises to $700, the capital gain is $200. In this case:
Capital Gains Yield = ($700 - $500) / $500 = 0.40 or 40%This means your investment has appreciated by 40%. This yield is separate from any income the asset generates, such as dividends or rent.
Key Points to Remember:
- Capital Gain: The increase in the value of an asset.
- Investment: The amount initially spent on purchasing the asset.
- Appreciation: How much the asset’s value has grown.
- Value: The current worth of the asset.
- Profitability: How effectively the investment generates returns.