Capital Accumulation
What is Capital Accumulation?
Capital accumulation occurs when a company acquires assets. Capital accumulation also occurs when an institutional investor or other financial institution acquires a large position in a company over time.
How Does Capital Accumulation Work?
Companies can accumulate assets in a variety of ways, and it is important to remember that assets can be physical, intangible or financial. In any case, their job is to produce revenue and profits. A company can accumulate capital by acquiring another company and/or its assets, issue shares, issue bonds, reinvesting profits, etc.
In the investing world, an institution might engage in capital accumulation by buying shares of, say, Company XYZ here and there over time until it has a substantial stake in the company.
Why Does Capital Accumulation Matter?
For companies, capital accumulation can signal preparation for growth. For investors, capital accumulation can signal interest in an acquisition or in becoming active in the company's management. For these investors, the accumulation takes place over time so as to do so "quietly" and without driving up the price of the shares suddenly.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
