DEFINITION of 'Return On Capital Gains'

The return that one gets from an increase in the value of a capital asset (investment or real estate). The return on capital gain is the measure of the investment gain for an asset holder, relative to the cost at which an asset was purchased. More specifically, return on capital gains is a measure of return on realized gains, after consideration for any taxes paid, commissions or interest.

BREAKING DOWN 'Return On Capital Gains'

Return on capital gains is measured on realized gains recognized from the sale or maturity of an investment asset, net of costs. For example, selling a stock for $10, which was purchased for $5, while accounting for a total of $2.50 in commissions and applicable taxes, would equate to a 50% return on capital gains. Other investment measures tend to measure returns of unrealized gains, which is why some may prefer to use return on capital gains, instead.

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