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Finance: What is Capital Appreciation (Mutual Funds)? 10411 Views


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What is Capital Appreciation (Mutual Funds)? Capital Appreciation is the increase in the market value of an investment asset, meaning it can be sold for a higher price than its original cost, resulting in a profit. This is how profits in stocks and real estate are usually made, and can also be the case for bonds when interest rates have dropped from the time of original purchase.

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Transcript

00:00

Finance a la shmoop what is capital appreciation as in the sense of an

00:07

investment fund or a mutual fund you know that is like what does it mean to

00:12

have a mutual fund with a focus on capital appreciation all right people

00:17

think more, more assets all right you have capital and yes you [Woman with a vault full of money]

00:22

appreciate having that capital but you'd appreciate it more if there was more of

00:27

it like it appreciated so a capital appreciation fund is one which focuses

00:32

on just growing the assets bigger and bigger don't really care how the capital

00:37

gets grown don't necessarily need dividends don't necessarily need minimum

00:41

p/e ratios don't necessarily need balance sheet covenants on the

00:46

investments you make don't care if it's exposed to the Venezuelan oil companies [Venezuela city landscape]

00:51

or the Australian dollar in a cap app fund well you just want the dough to [Money falls into flower pot]

00:55

grow and this ethos is in contrast to other flavors of funds which for example

01:01

need to throw off cash in the form of dividends like in a growth and income

01:06

fund or interest like in a bond fund like you know it's cash people need to

01:11

live on right so those have to do a capital appreciation does not so what's

01:14

a typical investment in a capital appreciation fund well usually be

01:18

something like a mega trend tech stock that just grows or appreciates with time [Man typing on laptop]

01:23

and really doesn't throw off much if any of a dividend like Amazon, Netflix

01:27

Facebook, Google those guys so think of a capital appreciation fund is the body [Man wearing underpants in a locker room]

01:32

builder of the mutual fund world it just wants to grow everywhere

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