1.15What is capital appreciation?
Capital appreciation means the value of what you own going up. For shares, it is the rise in share price above your buying price.
It is the main way most long-term investors build wealth. As a company grows its profits over years, its share price tends to rise over time (though not always, and not in a straight line).
You buy a plot of land for ₹5 lakh. Ten years later, a highway is built nearby and it is worth ₹15 lakh. The ₹10 lakh increase is capital appreciation.
Suppose you bought 10 shares of a company at ₹1,000 each (₹10,000). Years later the price is ₹2,500, so your holding is worth ₹25,000. Your capital appreciation is ₹15,000. This is an unrealised gain until you sell. Once you sell, it becomes a realised gain and may be taxed.
- (₹2,500 − ₹1,000) ÷ ₹1,000 = 1.5
- 1.5 × 100 = 150%
- Prices can also fall: capital depreciation.
- Unrealised gains can disappear before you sell.
- Capital appreciation = rise in value.
- Unrealised until you sell.
- Realised gains may be taxed.
Q1. You buy at ₹400 and the price is now ₹500. What is the gain %?Show answer
(500 − 400) ÷ 400 × 100 = 25%.
Q2. What is an unrealised gain?Show answer
A profit on paper that you have not locked in by selling.
Q3. Does capital appreciation happen in a straight line?Show answer
No. Prices go up and down along the way.