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Capital Growth

Discussion in 'Investing Glossary' started by Glossary, 26th Sep, 2006.

  1. Glossary

    Glossary Active Member

    12th Sep, 2006

    Capital Growth refers to the growth in market value of an investment asset over time. The term is generally used to indicate an unrealised gain, where an asset has grown in value (at least on "paper"), but has not yet been sold.

    There are generally two ways of making money from an asset. Growth is an increase in the market value of the asset. Income is money paid out from the asset (eg from rent, or from dividends or distributions). The two types of return are treated differently for tax purposes - so attaining the right balance between growth and income in your portfolio can make quite a bit of difference in after-tax returns.

    The main difference is that income is usually taxed in the year in which it became payable, while capital growth is usually only taxed when an asset is sold (the capital gain is "realised") - sometimes many years after the asset was purchased.

    Also known as:
    • Growth

    See also:
    Last edited by a moderator: 26th Sep, 2006