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Market appreciation" doesn't mean a market or sector sends a congratulatory note to an asset owner, but there's a certain correlation between market appreciation and a potential boost in the owner's morale. Market appreciation illustrates that a resource's worth favorably navigated the ups and downs of the economy over a given period -- say, five or 10 years.
Definition
Asset appreciation means asset growth or an increase in the asset's market value. Financial commentators often use the terms "market appreciation," "appreciation" and "asset appreciation" interchangeably. In accounting terminology, asset appreciation may be a gain if the owner realizes the profit -- that is, the owner sells the asset and reaps the gain. Market appreciation touches on the concept of asset, which represents anything a person or an organization uses to operate, make money and reach lifestyle or commercial goals. Simply put, an asset is what an individual or a business owns, unlike a debt, which requires future repayments.
The Mechanics
Market appreciation happens through economic fluctuations, as well as other factors that affect market conditions. These run the gamut from business legislation and technological brilliance to competitive scenarios and meteorological or geological fortune. For example, specific parcels might appreciate if land surveyors uncover a trove of rare-earth minerals underneath the surface, or if Congress enacts legislation that designates the parcels as economically valuable. Likewise, a company's technological products may rise in worth -- usually through the organization's own price hike strategy -- if rivals cannot match its innovation level and come up with better or similar items.
Relevance
Perhaps market appreciation is the very element that drives prices up and enables the economic engine to function effectively. Increases in asset values generate growth -- which, in turn, affects the wealth of individuals and businesses. For example, businesses might be unable to raise prices period after period -- say, every year -- if asset prices continually nosedive and consumers see their net worth decline. This scenario could lead to deflation, a major incubus for public officials because it slows the economy. A perfect illustration of the economic relevance of asset appreciation -- or depreciation, for that matter -- is the real estate sector. Declining house values gradually erode consumers' worth, resulting in lower property taxes and in activity declines in other industries -- such as construction and home improvement.
Expert Guidance
To properly evaluate assets' worth, companies and individuals reach out to asset appraisers and other professionals well versed in the minutiae of resource evaluation. These include valuation specialists and assessors.
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