Capital Gains Yield Calculator

Capital gains yield measures the price return on your investment. If you invest in the stock market, there are 2 ways that you can achieve returns: price appreciation and dividend returns. Please check out our dividend calculator and investment calculator. Hence, the return on your investment will be the sum of the two components, as we have shown in the equation below:

return = price appreciation + dividends returns

The capital gains yield is the return you achieve from price appreciation only. Calculating capital gains yield can tell you how much your investment has risen due to price increases.

Capital gains yield is a relatively simple metric to calculate (even simpler with the capital gains yield calculator). To calculate the capital gains yield, there are 4 steps you need to follow:

1. Determine the bought price of your investment.
2. Determine the current price of your investment.
3. Calculate the capital gains of your investment.
4. Calculate the capital gains yield.

To illustrate how to calculate capital gains yield, let's look at a hypothetical situation. Let's say you are a stock investor, and you just bought a share for $100.

1. Determine the bought price of your investment.

   In this case, the bought price of your investment is $100.

2. Determine the current price of your investment.

   Fast forward 1 year - the investment you bought a year ago is now worth $120. So, the current price of your investment is $120.

3. Calculate the capital gains of your investment.

   After obtaining the bought price and current price of your investment, you can calculate the capital gains using the equation below:

   capital gains = current price - bought price

   So, in our example, capital gains = $120 - $100 = $20.

4. Calculate the capital gains yield.

   Now that you've calculated your capital gains, it's finally time to use the capital gains yield formula:

   capital gains yield = capital gains / bought price

   In this instance, the capital gains yield = $20 / $100 = 20%.

By calculating capital gains yield, you can:

• Understand the amount of tax you have to pay on your investment

  In general, the tax rates for capital gains and dividend returns are usually different. Capital gains normally pose a higher tax rate than dividend returns. Hence, it is important to understand how to calculate capital gains yield on the stock so you know the amount of tax you have to pay on your investment.

• Understand the components of your investment returns

  Calculating the capital gains yield also helps you to understand where your returns come from. Please use our rate of return calculator. Dividend returns are normally more valued by most investors due to their stability and lower tax rates. By having a better understanding of your investments' returns, you will be able to adjust your portfolio accordingly.

• Understand the volatility of your investment

  The volatility of your investment can also be inferred by calculating and understanding the capital gains yield. If the capital gains yield of your investment fluctuates a lot in a short period of time, it might be due to the high volatility of your investment.

All in all, capital gains yield tax is a very handy tool when it comes to analyzing the returns of your investments. However, it is also important to keep in mind that dividend returns can also contribute majorly to your return. Thus, it is important to take them into account as well.