Updated on March 19, 2023
Capital growth is the increase in value of an asset or investment over time. It is also known as capital appreciation and is measured as the difference between the market value or the value at the time of assessment of the asset/investment and its value/purchase price/acquisition price at the time of purchase/acquisition. A favourable capital growth is when the value of the assets grows by a certain proportion and as per the goals, expected returns as well as the investment objectives.
What are the key features of Capital growth?
Capital growth is characterised by:
1. Capital growth can mean different things for different assets. For stocks, there can be growth in a company’s performance and hence increase in its share price, increase in prices of real estate and increase in NAV of a Mutual Fund are all examples of capital growth.
2. Investors with low-risk tolerance will be happy with regular income while those with high-risk tolerance will wait longer for capital appreciation.
3. In terms of stock markets, aggressive investors will invest in small and mid-caps for high growth while conservative investors will invest in Blue chips for moderate capital growth.
4. Capital growth becomes taxable once the assets are sold.