What is Appreciation?
Appreciation is an increase in the value of an investment.
How Does Appreciation Work?
Let's assume you purchased one share of Company XYZ stock for $5. If that share's value increased to $7, the investment has appreciated by $2.
Note that even though the investment has appreciated by $2, you will not benefit unless you sell the stock and put $7 back in your pocket. If you do not sell, the appreciation is often referred to as “paper profit.”
Why Does Appreciation Matter?