What is capital appreciation?

Capital appreciation refers to the portion of an investment where the gains in the market price exceed the original investment's purchase price or cost basis. Capital appreciation can occur for many different reasons in different markets and asset classes. Some of the financial assets that are invested in for capital appreciation include:

What is the difference between capital appreciation and income?

Investors who prioritize income are often seeking financial stability, especially during retirement. On the other hand, capital appreciation is all about growing the initial investment over time. This strategy aims for the value of the investment to increase, usually through price appreciation.

How is capital appreciation calculated?

Essentially, it is how much the value of an asset has increased since an investor purchased it. Analysts calculate capital appreciation by comparing the asset’s current market price and the original purchase price, also called the cost basis. Capital appreciation can be understood by analyzing an example from stock market investing.