What is a Capital Appreciation Fund?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 04 November 2019
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Often referred to as an aggressive growth fund, the capital appreciation fund is an example of taking a proactive and sometimes risky approach to increasing the value of a financial portfolio. Essentially, the capital appreciation fund is a mutual fund that is geared toward inclusion of investments that have a high level of potential for rapid growth. At the same time, these investment opportunities are characterized by an elevated incidence of risk.

There are a few basic guidelines to keep in mind when considering the establishment of a capital appreciation fund. First, this is an investment strategy that should be managed with the support of a fund manager of a broker. The degree of success relies heavily on immediate access to data about the current market conditions, and often involves the need to make decisions quickly. Not all investors, especially those who have careers, are in a position to move this quickly.

Second, a capital appreciation fund is a viable option for many types of revenue generation, but should not be considered a particularly good choice for creating retirement funds. The very natures of the investment means that it is possible to create a fortune today but lose a substantial part of the investment tomorrow. Retirement funds work better when they are built around investments that predictably offer a modest return.


Last, the nature of the investments that are included in a capital appreciation fund tend to follow market trends. This makes it imperative to watch market indicators closely, so that it is possible to buy and sell in a manner that maximizes the chances for making a profit.

The use of a capital appreciation fund is not for the conservative investor. Mutual funds of this type rely upon a high amount of return on the stocks included in the fund strategy. Because the nature of the stock options are of a volatile nature, the degree of risk is often quite great. While the returns on the investments can be substantial, the chance for loss is also high. Persons who prefer to deal with relatively stable stock options and are happy with a small but consistent return would do well to avoid the capital appreciation fund, and concentrate on investment strategies that do not involve risky stocks.


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