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Capital appreciation is an increase in the price or value of assets.[1] It may refer to appreciation of company stocks or bonds held by an investor, an increase in land valuation,[2] or other upward revaluation of fixed assets.
Capital appreciation may occur passively and gradually, without the investor taking any action. It is distinguished from a capital gain which is the profit achieved by selling an asset. Capital appreciation may or may not be shown in financial statements; if it is shown, by revaluation of the asset, the increase is said to be "recognized". Once the asset is sold, the appreciation since the date of initially buying the asset becomes a "realized" gain.
When the term is used about valuation of companies publicly listed, capital appreciation is the goal of an investor seeking long-term growth. It is growth in the principal amount invested, but not necessarily an increase in the current income from the asset.
In the context of investment in a mutual fund, capital appreciation refers to a rise in the value of the securities in a portfolio which contributes to the growth in net asset value. A capital appreciation fund is a fund for which it is its primary goal, and accordingly invests in growth stocks.[3]
- ^ Capital Appreciation at Investopedia. Retrieved 2012-06-02.
- ^ Spillane, Chris (8 September 2011). "U.K. Homeowners Shouldn't Count on Capital Gains, Minister Says". Bloomberg. London. Retrieved 2012-06-02.
'Gone are the days where you buy a house for capital appreciation,' Shapps... said
- ^ Capital Appreciation Fund at Investopedia. Retrieved 2012-06-02.