What is the difference between dividends and capital gains?

What is the difference between dividends and capital gains?

Dividends are payments made to shareholders from a company's profits, while capital gains are profits from selling an asset.

Can you give me an example of each?

Sure! If you own shares of a company that pays $1 per share as a dividend, that's your dividend income. If you bought those shares for $10 and sold them for $15, the $5 difference is your capital gain.

Which one is better for investors?

It depends on the investor's goals. Dividends provide regular income, while capital gains can lead to larger profits over time.

Are there tax implications for both?

Yes, dividends are often taxed as income, while capital gains may be taxed at a lower rate depending on how long you've held the asset.