Capital Appreciation

A rise in the value of an asset based on a rise in market price. Essentially, the capital that was invested in the security has increased in value, and the capital appreciation portion of the investment includes all of the market value exceeding the original investment or cost basis. Capital appreciation is one of the two main sources of investment returns, with the other being dividend or interest income.

For example, say you purchase a share for $10, which pays a dividend of a $1 per share each year, and is now trading at $15 per share a year later. Your capital appreciation in the investment is $5, or 50%, as the price of the share has increased $5 over your purchase price or cost basis. Your interest income return is $1, or 10%, for a total return on the shares is $6 or 60%.

Capital appreciation is often a stated investment goal of many mutual funds. These funds look to find investments that will rise in value based on increased earnings or other fundamental metrics. Investments targeted for capital appreciation tend have more risk than assets chosen for capital preservation and income generation, such as government, municipal bonds, or dividend-paying stocks. Because of this, capital appreciation funds are considered appropriate for risk-tolerant investors.


Investment dictionary. . 2012.

Look at other dictionaries:

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  • Capital Appreciation Fund — A mutual fund that attempts to increase asset value primarily through investments in growth stocks. The heavy investment in growth stocks increases the risk associated with these types of funds. Also called aggressive growth fund . As its name… …   Investment dictionary

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  • appreciation — Increase in the value of an asset. Bloomberg Financial Dictionary A rise in a currency s value. Chicago Mercantile Exchange Glossary * * * appreciation ap‧pre‧ci‧a‧tion [əˌpriːʆiˈeɪʆn] noun [uncountable] 1. FINANCE an increase in the value of… …   Financial and business terms

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  • appreciation — [[t]əpri͟ːʃie͟ɪʃ(ə)n[/t]] appreciations 1) N SING: also no det, oft N of n Appreciation of something is the recognition and enjoyment of its good qualities. ...an investigation into children s understanding and appreciation of art... Brian… …   English dictionary

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