What Is Capital Appreciation?

By Matthew Frankel, CFP – Updated Sep 10, 2025 at 12:54 PM EST

Key Points

Capital appreciation is when an investment's market price rises above the purchase cost.
Total return combines dividends and capital appreciation for a complete profit picture.
Selling an appreciated asset turns it into a capital gain, relevant for tax calculations.

It is common knowledge that the goal of investing is to buy low and sell high. The technical term for this is capital appreciation, and it's an important concept for investors to know since it can have tax implications and is only one of the two ways investments can make money.

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Toy houses stacked in a row with arrows pointing up at an incline. — Image source: Getty Images

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Capital

Capital is any type of asset that you can use to generate future value, including cash and tangible and intangible assets.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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