appreciation
An increase in the value of an asset over time.
Example
“The appreciation of their home over 10 years added $150,000 to their net worth.”
Memory Tip
When you appreciate something, you value it more. Same with assets — appreciation means the market values it more.
Why It Matters
Appreciation is a core driver of long-term wealth building. Unlike income appreciation is not taxed until you sell meaning your gains can compound untaxed for decades. This tax-deferred compounding is why investing in appreciating assets builds wealth more effectively than keeping money in cash.
Common Misconception
People often confuse appreciation with guaranteed growth. Assets can also depreciate and lose value over time. Stocks real estate and collectibles all appreciate on average over long periods but any individual asset can decline in value sometimes permanently.
In Practice
If you buy a home for $300,000 and it appreciates at 3% annually after 20 years it is worth roughly $541,000. That $241,000 gain is unrealized and you do not owe tax on it until you sell. This is why long-term real estate and stock ownership builds wealth so effectively over time.
Etymology
From Latin 'appretiare' meaning 'to set a price on' — when the price rises.
Common Misspellings
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