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Capital appreciation

Capital appreciation is the rise in an asset's value based on a rise in the market price.

Expanded Definition

Capital assets appreciate when the market price for them rises. The term is typically applied to securities, bonds, and real estate.

Capital appreciation is different from the total return an investor enjoys from an asset. If a security is selling for $30, but you purchased it for $20, the capital appreciation from your investment is $10 or 50%. If that stock paid a $2 dividend, however, your total return is $12 or 60%. Until the asset is sold, however, the capital appreciation is unrealized.

Capital appreciation is a goal for many mutual funds, as distinct from capital preservation or income generation. Funds whose goal is capital appreciation seek investments whose underlying business will grow and thereby generate a higher share price. These capital appreciation funds are also called aggressive growth funds.

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