PosiStep 7: How you make or lose money: capital gains, dividends, risk
People buy shares hoping to make money, but shares can also lose money. This PosiStep explains exactly where returns come from, how losses happen, and why investing and trading are very different activities.
Capital gains: selling for more than you paid
If you buy a share at ₹100 and later sell it at ₹130, you make a capital gain of ₹30, or 30%. If you sell at ₹80, you make a capital loss of ₹20.
Until you sell, any gain or loss is unrealised: it exists only on paper and can grow, shrink or reverse. It becomes realised when you sell.
Dividends: a share of the profit
Some companies pay part of their profit to shareholders as dividends, usually once or a few times a year. A company paying ₹5 per share gives ₹500 to someone holding 100 shares.
Dividends are not guaranteed. A company can raise, cut or stop them, and many fast-growing companies pay none because they reinvest their profits. PosiStep 9 explains dividend dates.
Total return and compounding
Your total return is capital gain plus dividends, compared with what you invested. Over many years, returns can compound: gains earn further gains, like interest on interest. That is why time matters so much in investing.
Compounding works in both directions: repeated losses also add up, and a 50% fall needs a 100% rise just to get back to where you started.
How money is lost
A share price can fall for many reasons: weaker profits, too much debt, bad news, fraud, or simply a falling market. In the worst case, a company can fail and its shares can become worthless.
Losses usually hurt more when money is concentrated in one or two companies, when shares are bought on tips without research, or when borrowed money is used. PosiStep 18 covers risk and common mistakes.
Investing vs trading
Investing means buying shares of businesses you have studied and holding them for years, aiming to benefit from the company's growth and dividends. Trading means buying and selling over days, hours or minutes (intraday), aiming to profit from short price moves.
Trading needs much more time and skill, pays charges on every trade, and is closer to speculation. Studies by SEBI have found that a large majority of individual intraday and derivatives traders in India lose money. Taxes also apply to profits and differ by holding period, so check the current rules.
Where PositoAI fits
The Actions tab on a company page shows its dividend history with yearly totals. PositoAI's research tools are built for studying companies, not for short-term trading signals.
Key terms
- Capital gain / loss
- The profit or loss from selling a share for more or less than you paid.
- Unrealised vs realised
- Paper gain or loss while you hold; real gain or loss once you sell.
- Dividend
- A part of the company's profit paid to shareholders; never guaranteed.
- Total return
- Capital gain plus dividends, as a share of the amount invested.
- Compounding
- Gains earning further gains over time; losses compound too.
- Intraday trading
- Buying and selling the same share within one day.
Try it
You buy 50 shares of made-up company Coral Foods at ₹200 (₹10,000). During the year it pays a ₹4 dividend per share, and you then sell at ₹230. What is your total gain, before charges and tax?
Capital gain: (₹230 − ₹200) × 50 = ₹1,500. Dividends: ₹4 × 50 = ₹200. Total: ₹1,700, a 17% total return on ₹10,000.
See it live on PositoAI
Open Infosys on PositoAI and click the Actions tab. Look at the dividend history and find the total dividend per share paid in the most recent full year.
What this does not tell you
Past gains and past dividends show what happened, not what will happen. A company that paid steady dividends can cut them, and a share that rose for years can fall.
Quick quiz
You buy at ₹100 and the price is now ₹120, but you have not sold. What is the ₹20?
Until you sell, a gain is unrealised: it exists on paper and can still change.
Are dividends guaranteed?
Dividends depend on the company's profits and decisions; they can change or stop at any time.
A share falls 50%. What rise is needed to get back to the starting price?
From ₹100 to ₹50 is −50%. Going from ₹50 back to ₹100 needs a 100% rise.
What best describes investing?
Investing is long-term ownership of businesses you have researched; trading aims at short price moves.
What is total return?
Total return combines price gain (or loss) and dividends, compared with the amount invested.
Answer every question on this page correctly to complete this PosiStep.
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PosiCourse is for education only. It does not recommend buying or selling any share. Examples with made-up numbers are not real companies. PositoAI is for research and education only and is not investment advice.