Capital Gains Yield Calculator - Calculate Price Appreciation of an Investment

1. What is the Capital Gains Yield Calculator?

Definition: This calculator computes the Capital Gains ($ CG $) and Capital Gains Yield ($ CGY $) of an investment based on its Bought Price ($ P_0 $) and Current Price ($ P_1 $). $ CGY $ represents the percentage increase (or decrease) in the price of an investment, excluding dividends.

Purpose: Investors use this tool to evaluate the price appreciation of investments like stocks or bonds, helping to assess performance and inform decisions about buying, holding, or selling.

2. How Does the Calculator Work?

The calculator uses the following formulas, as shown in the image above:

$ CG = P_1 - P_0 $

$ CGY = \left( \frac{CG}{P_0} \right) \times 100 $

Where:

$ P_0 $: Bought Price (in selected currency);
$ P_1 $: Current Price (in selected currency);
$ CG $: Capital Gains (in selected currency);
$ CGY $: Capital Gains Yield (as a percentage).

Steps:

Enter the Bought Price ($ P_0 $) and select the currency (USD, EUR, GBP, JPY).
Enter the Current Price ($ P_1 $) in the same currency.
The calculator computes $ CG = P_1 - P_0 $, then calculates $ CGY = \left( \frac{CG}{P_0} \right) \times 100 $.
Results are formatted (scientific notation for values < 0.001, otherwise 4 decimal places) and displayed for Capital Gains and Capital Gains Yield.

3. Importance of Capital Gains Yield Calculation

Calculating Capital Gains Yield is essential for:

Performance Evaluation: Measures the price appreciation of an investment, helping to assess its growth potential.
Investment Decisions: Informs whether to hold or sell an investment based on its price performance.
Tax Planning: Provides insight into potential taxable gains, aiding in financial planning.

4. Using the Calculator

Example 1: Calculate the Capital Gains and Capital Gains Yield for a stock bought at $100 and now worth $120, in USD:

Bought Price ($ P_0 $): $100;
Current Price ($ P_1 $): $120;
Capital Gains ($ CG $): $ 120 - 100 = 20 \, \text{USD} $;
Capital Gains Yield ($ CGY $): $ \left( \frac{20}{100} \right) \times 100 = 20.0000\% $.

Example 2: Calculate the Capital Gains and Capital Gains Yield for a stock bought at €50 and now worth €40, in EUR:

Bought Price ($ P_0 $): €50;
Current Price ($ P_1 $): €40;
Capital Gains ($ CG $): $ 40 - 50 = -10 \, \text{EUR} $;
Capital Gains Yield ($ CGY $): $ \left( \frac{-10}{50} \right) \times 100 = -20.0000\% $.

5. Frequently Asked Questions (FAQ)

Q: Why doesn’t the Capital Gains Yield include dividends?
A: $ CGY $ focuses solely on price appreciation to isolate the growth component of an investment’s return. Dividends are accounted for in the total return or dividend yield.

Q: Can Capital Gains Yield be negative?
A: Yes, if the Current Price is less than the Bought Price, the $ CGY $ will be negative, indicating a capital loss.

Q: How does Capital Gains Yield help with tax planning?
A: Understanding $ CG $ and $ CGY $ helps estimate potential taxable gains, allowing investors to plan for tax liabilities.