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What is a Long-Term Gain?

Jason C. Chavis
Jason C. Chavis

A long-term gain is a profit over a significant period of time resulting from the investment of money into some sort of capital asset. Usually, this form of return comes from the purchase of stocks, bonds or real estate, often seen by investors and financial professionals as the primary security producing the best capital gains. People interested in making money from investing consider the amount of risk associated with certain financial instruments, the return that can be expected and the holding period necessary to achieve the desired results. Oftentimes, a long-term gain stems from making an investment into a stock or other instrument that offers a reliable rate of return over the years, rather than some sort of fast-paced reward from a security that is riskier. For example, a long-term gain will most likely be generated from a company with a history of slow growth rather than a upstart firm with short duration potential.

As a form of investment income, long-term gain profits are subject to significant levels of taxation in most countries. Both individuals and corporations are required to pay tax on the capital gains, including those paid out on a yearly basis, known as dividends. The heaviest of these taxes results from the eventual sale or liquidation of a product after the holding time has expired. This can greatly affect the level of return a person or corporation can expect from the life of the investment. Certain nations do not charge this taxation, since they view the stock price having already been paid through the company's taxes.

Man climbing a rope
Man climbing a rope

The factor that separates a long-term gain from all other types of investment is the fact that time is an essential element. A stock, bond or real estate purchase can fluctuate rapidly over the years, but the investor makes the point to hold onto the capital assets with the belief that the return will be profitable at a later date. This makes long-term gain investments a primary component in portfolios for people concerned about retirement. For example, a person could purchase a stock and hold onto it for 30 years. Over this time, the stock has risen and fallen, but by the time the person sells the stock to garner a return, it has generated a significant overall gain in value, resulting in profit.

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