Capital Appreciation

A gain in the value of an asset due to a rise of its market price. Usually this is a rise from its purchase price.

Investors usually invest seeking for either capital appreciation or income(from interest and/or dividends).  In a bull market, investors usually seek capital appreciation as it is usually a faster way to make money.

It is important to keep one’s risk tolerance, time horizon and other factors in mind before making a decision to invest for capital appreciation or income. Investment in securities that yield income, such as high quality bonds, are usually more stable and the investor faces a low risk of losing his capital. Though there are many stories about investors who made extraordinary profits off capital appreciation, the potential of capital depreciation and hence losing one’s shirt should not be underestimated. Thus as usual, investor caveat.

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