CAPITAL GROWTH

Summary

Capital growth refers to the profit you make when an asset increases in value over time. It's the difference between what you paid for an investment (like stocks, real estate, or bonds) and what it's worth now or when you sell it. This growth represents unrealized gains while you still own the asset, and realized gains once you sell. Capital growth is a key way investors build wealth, alongside income from dividends or interest.

Usage Context

Understanding capital growth is essential when evaluating investment performance, comparing different asset classes, calculating total returns, making investment decisions, and understanding how wealth accumulation works in financial markets.

Common Confusions

• Confusing capital growth with regular income or dividends
• Thinking capital growth is the same as capital gains tax
• Believing capital growth is always positive or guaranteed
• Not understanding the difference between realized and unrealized capital growth
• Mixing up capital growth rate with total return