1. The amount by which proceeds from the sale of a capital asset exceed the cost basis. 2. In real estate and investments, the difference between the purchase price and the sale price when the sale price is more. When an investor buys an asset and sells it for a higher price, they incur a capital gain. In the United States, Capital Gains are taxed at a lower rate than other income if the asset is held for longer than one year. An investor may use capital losses to offset gains to minimize their taxes.
The act of trading an asset or conducting a financial transaction with a significant risk of losing most or all of its value with the expectation of a substantial gain. The risk of loss is more than offset by the possibility of a huge gain, otherwise, there would be very little motivation to speculate. To determine if an activity qualifies as speculative or investing can depend on the nature of the asset, holding period, and the amount of leverage.