Capital appreciation is an increase in the price or value of
asset
In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that c ...
s. It may refer to appreciation of company
stock
In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a compan ...
s or
bond
Bond or bonds may refer to:
Common meanings
* Bond (finance), a type of debt security
* Bail bond, a commercial third-party guarantor of surety bonds in the United States
* Chemical bond, the attraction of atoms, ions or molecules to form chemical ...
s held by an investor, an increase in
land valuation, or other upward
revaluation of fixed assets
In finance, a revaluation of fixed assets is an action that may be required to accurately describe the true value of the capital goods a business owns. This should be distinguished from planned depreciation, where the recorded decline in the valu ...
.
Capital appreciation may occur passively and gradually, without the investor taking any action. It is distinguished from a
capital gain
Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares.
A ...
which is the profit achieved by selling an asset. Capital appreciation may or may not be shown in
financial statement
Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity.
Relevant financial information is presented in a structured manner and in a form which is easy to un ...
s; 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 in reference to
stock valuation
In financial markets, stock valuation is the method of calculating theoretical values of companies and their stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and thus to profit fr ...
, capital appreciation is the goal of an investor seeking long term
growth
Growth may refer to:
Biology
* Auxology, the study of all aspects of human physical growth
* Bacterial growth
* Cell growth
* Growth hormone, a peptide hormone that stimulates growth
* Human development (biology)
* Plant growth
* Secondary grow ...
. 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
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICA ...
, capital appreciation refers to a rise in the value of the securities in a portfolio which contributes to the growth in
net asset value
Net asset value (NAV) is the value of an entity's assets minus the value of its liabilities, often in relation to open-end, mutual funds, hedge funds, and venture capital funds. Shares of such funds registered with the U.S. Securities and Exc ...
. A capital appreciation fund is a fund for which it is its primary goal, and accordingly invests in
growth stock
In finance, a growth stock is a stock of a company that generates substantial and sustainable positive cash flow and whose revenues and earnings are expected to increase at a faster rate than the average company within the same industry. A growth c ...
s.
Capital Appreciation Fund
at Investopedia
Investopedia is a financial media website headquartered in New York City. Founded in 1999, Investopedia provides investment dictionaries, advice, reviews, ratings, and comparisons of financial products such as securities accounts. Investopedia h ...
. Retrieved 2012-06-02.
See also
*Currency appreciation and depreciation
Currency depreciation is the loss of value of a country's currency with respect to one or more foreign reference currencies, typically in a floating exchange rate system in which no official currency value is maintained. Currency appreciatio ...
*Depreciation
In accountancy, depreciation is a term that refers to two aspects of the same concept: first, the actual decrease of fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wear, and second, the ...
*Holding gains Holding gains are generally defined as increases in the replacement costs of the assets held during a given period. Holding gains and losses accrue to the owners of assets and liabilities purely as a result of holding the assets or liabilities over ...
References
Accounting terminology
Valuation (finance)
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