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Calculating capital gain

earn money through capital gain from stock


Stock selected: 6033, PETRONAS Gas Berhad (PETGAS)
Amount bought: 2 lot ( 1 lot = 100 unit, so 2 lot = 200 unit)
Buy price and date: RM20.20 (20th August 2015)
Sell price and date: RM22.90 (29th Jan 2016)

Now, the capital gain can be calculated as below:
Capital gain = price difference per unit * number of units
Capital gain = RM(22.90 – 20.20)/unit * 200 units = RM540
Initial Investment = RM20.20/unit * 200 units = RM4040
Rate of return = Profit gained / Initial investment = RM 540 / RM4040 = 13.4%

As seen, if you have done this transaction, you have earned 13.4% of your initial investment just within 5 months! Comparing it to an annual fixed deposit rate of around 4.3%, this is doubtlessly a good investment. But, of course, this is just an illustration, a very positive example. Looking at the price chart of PETGAS, to carry out this transaction, you have to buy it at the lowest point. But how many investor is calm enough to fork in money when the share price is falling?

In fact, you might even find out many investors who do not have faith in PETGAS have sold PETGAS when it touches RM20.20 and never buy it again! This is why you need to pick a stock wisely and hold it tightly.

Vice versa, let say if you bought PETGAS at RM22 in around May 2015, and sell it at RM20.20 at 20th August 2015, capital loss has incurred.

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