Capital Gains Yield Calculator
This calculator helps you determine the Capital Gains Yield on an investment or asset. It measures the percentage increase in value from the purchase price to the selling price (or current value), excluding any dividends, interest, or other forms of income.
Enter the price you paid for the asset (Purchase Price) and the price you sold it for (or its current Selling Price) to calculate the yield.
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Understanding Capital Gains Yield
What is Capital Gains Yield?
Capital Gains Yield is a financial metric that measures the percentage increase in the value of an investment or asset over a specific period, based *only* on the difference between its purchase price and selling price (or current market value). It excludes any income generated by the asset, such as dividends from stocks or rental income from real estate.
It's a simple way to see how much the *price appreciation* contributed to the overall return on investment.
Capital Gains Yield Formula
The formula for Capital Gains Yield is:
Capital Gain = Selling Price - Purchase Price
Capital Gains Yield (%) = (Capital Gain / Purchase Price) * 100
Or, combining these:
Capital Gains Yield (%) = ((Selling Price - Purchase Price) / Purchase Price) * 100
Note: This formula requires the Purchase Price to be greater than zero.
Why Calculate Capital Gains Yield?
Calculating Capital Gains Yield helps investors understand the return generated purely from price appreciation. It's useful for comparing the performance of different assets where income streams might vary, or for analyzing assets that don't produce income (like gold, land, or growth stocks that don't pay dividends).
Capital Gains Yield Examples
Click on an example to see the step-by-step calculation:
Example 1: Simple Stock Gain
Scenario: You buy a stock and sell it for more than you paid.
1. Known Values: Purchase Price = $100, Selling Price = $120.
2. Calculate Capital Gain: $120 - $100 = $20.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($120 - $100) / $100) * 100 = ($20 / $100) * 100 = 0.2 * 100 = 20%.
5. Result: Capital Gains Yield = 20%.
Conclusion: The investment's value increased by 20% based on the selling price.
Example 2: Investment Loss
Scenario: You buy an asset and sell it for less than you paid.
1. Known Values: Purchase Price = $500, Selling Price = $450.
2. Calculate Capital Gain: $450 - $500 = -$50.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($450 - $500) / $500) * 100 = (-$50 / $500) * 100 = -0.1 * 100 = -10%.
5. Result: Capital Gains Yield = -10%.
Conclusion: The investment experienced a capital loss, resulting in a -10% yield.
Example 3: No Change in Price
Scenario: You buy an asset and sell it for the exact same price.
1. Known Values: Purchase Price = $75, Selling Price = $75.
2. Calculate Capital Gain: $75 - $75 = $0.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($75 - $75) / $75) * 100 = ($0 / $75) * 100 = 0 * 100 = 0%.
5. Result: Capital Gains Yield = 0%.
Conclusion: There was no capital gain or loss, resulting in a 0% yield from price appreciation.
Example 4: Significant Gain
Scenario: An asset doubles in value.
1. Known Values: Purchase Price = $50, Selling Price = $100.
2. Calculate Capital Gain: $100 - $50 = $50.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($100 - $50) / $50) * 100 = ($50 / $50) * 100 = 1 * 100 = 100%.
5. Result: Capital Gains Yield = 100%.
Conclusion: The asset's value increased by 100% relative to its purchase price.
Example 5: Small Purchase Price
Scenario: Calculating yield on an inexpensive item that appreciates.
1. Known Values: Purchase Price = $5, Selling Price = $15.
2. Calculate Capital Gain: $15 - $5 = $10.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($15 - $5) / $5) * 100 = ($10 / $5) * 100 = 2 * 100 = 200%.
5. Result: Capital Gains Yield = 200%.
Conclusion: Despite the small dollar gain, the percentage yield is high because the purchase price was low.
Example 6: Calculating Current Yield
Scenario: You want to know the current capital gains yield of an asset you still hold.
1. Known Values: Purchase Price = $1000, Current Market Value (Selling Price) = $1150.
2. Calculate Capital Gain: $1150 - $1000 = $150.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($1150 - $1000) / $1000) * 100 = ($150 / $1000) * 100 = 0.15 * 100 = 15%.
5. Result: Current Capital Gains Yield = 15%.
Conclusion: The asset currently shows a 15% gain on your initial investment.
Example 7: Yield on a Larger Investment
Scenario: Calculating yield on a significant investment amount.
1. Known Values: Purchase Price = $50,000, Selling Price = $53,000.
2. Calculate Capital Gain: $53,000 - $50,000 = $3,000.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($53,000 - $50,000) / $50,000) * 100 = ($3,000 / $50,000) * 100 = 0.06 * 100 = 6%.
5. Result: Capital Gains Yield = 6%.
Conclusion: A $3,000 gain on a $50,000 investment results in a 6% yield.
Example 8: Real Estate Scenario (Simplified)
Scenario: Calculate yield on a property sale (excluding closing costs, improvements, etc., for simplicity).
1. Known Values: Purchase Price = $200,000, Selling Price = $250,000.
2. Calculate Capital Gain: $250,000 - $200,000 = $50,000.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($250,000 - $200,000) / $200,000) * 100 = ($50,000 / $200,000) * 100 = 0.25 * 100 = 25%.
5. Result: Capital Gains Yield = 25%.
Conclusion: The property's price appreciated by 25%.
Example 9: Asset Losing Significant Value
Scenario: An asset loses a large portion of its value.
1. Known Values: Purchase Price = $1000, Selling Price = $100.
2. Calculate Capital Gain: $100 - $1000 = -$900.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($100 - $1000) / $1000) * 100 = (-$900 / $1000) * 100 = -0.9 * 100 = -90%.
5. Result: Capital Gains Yield = -90%.
Conclusion: A significant capital loss results in a -90% yield.
Example 10: Calculating Yield for a Small Gain
Scenario: A small gain on a moderately priced asset.
1. Known Values: Purchase Price = $250, Selling Price = $260.
2. Calculate Capital Gain: $260 - $250 = $10.
3. Formula (Yield): ((Selling Price - Purchase Price) / Purchase Price) * 100
4. Calculation: (($260 - $250) / $250) * 100 = ($10 / $250) * 100 = 0.04 * 100 = 4%.
5. Result: Capital Gains Yield = 4%.
Conclusion: A $10 gain on $250 is a 4% capital gains yield.
Understanding Investment Returns
While Capital Gains Yield focuses only on price appreciation, the total return on an investment often includes...
Important Considerations
Keep in mind that Capital Gains Yield calculation doesn't account for:
- Inflation
- Transaction costs (fees, commissions)
- Taxes on capital gains
- Dividends, interest, or other income
- Holding period (this formula is a simple percentage change)
For a complete picture of investment performance, consider metrics like Total Return or Annualized Return.
Frequently Asked Questions about Capital Gains Yield
1. What is Capital Gains Yield?
Capital Gains Yield is the percentage increase in an investment's value based solely on the difference between its purchase price and selling price. It measures the return from price appreciation.
2. What is the formula for Capital Gains Yield?
The formula is: ((Selling Price - Purchase Price) / Purchase Price) * 100.
3. Can Capital Gains Yield be negative?
Yes. If you sell an asset for less than you paid for it (a capital loss), the Capital Gain will be negative, resulting in a negative Capital Gains Yield.
4. How is Capital Gains Yield different from Total Return?
Capital Gains Yield *only* considers the change in price. Total Return includes Capital Gains Yield PLUS any income received from the investment, such as dividends, interest, or rent.
5. Does this calculation account for taxes or fees?
No, this simple calculator uses the raw purchase and selling prices. Real-world calculations for tax purposes or net return would need to include transaction costs and potentially adjustments for inflation or property improvements.
6. What if the Purchase Price was zero?
The formula requires dividing by the Purchase Price. If the Purchase Price is zero, the yield is mathematically undefined or infinite. This calculator requires a Purchase Price greater than zero.
7. Is Capital Gains Yield annualized?
No, this calculation provides the yield over the entire holding period, regardless of how long that period was. To compare investments held for different lengths of time, you would typically calculate an *Annualized* Capital Gains Yield (or Annualized Total Return).
8. Why is it important to distinguish between Capital Gains Yield and income yield (like dividends)?
Understanding where your return comes from (price appreciation vs. income) helps in evaluating different types of investments and aligns with different investment strategies (growth vs. income). It's also crucial for tax purposes, as capital gains and ordinary income are often taxed differently.
9. Can I use this for any asset?
Yes, the concept applies to any asset you buy and potentially sell: stocks, bonds, real estate, collectibles, commodities, etc., as long as you have a clear purchase price and a selling price or current market value.
10. Does a high Capital Gains Yield always mean it was a good investment?
A high yield indicates significant price appreciation. However, whether it was 'good' depends on your investment goals, the risks taken, the time period, the overall market conditions, and what you could have earned elsewhere (opportunity cost).
