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Understanding the difference between interest income and capital gain

One of the key differentiation that an investor needs to know is between interest income and capital gain. Read on to understand.

When you make investments, you expect to earn from those investments. This earning comes to you in one of 2 different ways:

  1. Interest
  2. Appreciation in value

Interest is the most widely understood kind. When you put our money into a savings bank account or FD, you earn interest income. The rate of interest is fixed and the amount gets paid out to you.

When you invest in an asset like property or gold, the value of it increases over time. This appreciation in the value of your asset is a gain (called capital gain) which is often irregular and unpredictable. 

The same thing happens when you invest in shares or a mutual fund. Your return comes in the form of gains you make when the value increases. 
When you invest through Scripbox, your money gets invested in mutual funds. It does not earn interest but is expected to increase in value.
It is useful to remember the difference. It is also important to remember that appreciation in value takes time.
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