Capital Appreciation

Filed Under »
Dictionary Says

Definition of '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.
Investopedia Says

Investopedia explains 'Capital Appreciation'

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.

Articles Of Interest

  1.

    The Advantages Of Investing In Aggressive Companies

    Often the most attractive companies are also a little fierce - learn how to spot healthy corporate aggression.

  2. What Are A Stock's "Fundamentals"?

    The investing world loves to talk about fundamentals, but do you know what it means?

  3. Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.

  4. Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."

  5. Mutual Fund Style Drift Not Always A Bad Thing

    Style drift has a bad reputation, but it can be a sign that your fund is thriving.

  6. The Hidden Fees In 401(k)s

    Learn about the conspicuously disclosed fees that lurk within your 401(k) investments.

  7. Choose A Fund With A Winning Manager

    We break down the key components of analyzing a fund manager's performance so you can find a winner.

  8. Analyzing The Best Retirement Plans And Investment Options

    Understanding the various retirement investments - from annuities to 401(k)s and everything in between - is crucial to reaching your retirement goals. Here, we examined many of the popular investments ...

  9. Women: Invest In Your Financial Literacy

    Learning about money may seem intimidating, but it's not as hard as it looks.

  10. 4 Behavioral Biases And How To Avoid Them

    Here are four common common behavioral biases for traders and how to minimize their effects on your portoflio.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  2. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  3. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  4. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  5. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  6. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=aa94297adf6a6b8394250159593cd739