What Is the Difference Between Income & Appreciation?

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Income and appreciation are common accounting terms and are used in a variety of financial situations. In general, income refers to revenues or profits that are earned in a structured way, with rates that can be easily predicted and are typically agreed on beforehand. Appreciation refers more to value that is gained through natural movements of the market. When people compare both income and appreciation, they are typically talking about investment in stocks and about how investment returns work.

Stock Income

Stock income is known as dividends. These are regular payments that stockholders receive from the company. Companies have many different dividend plans to pay their investors. Some pay very few dividends or none at all, preferring to invest funds back into the company. Others give out very large dividends to keep stockholders pleased. Dividends are typically granted on a scale that's based on the earnings of the business throughout the payment period.

Stock Appreciation

Stock appreciation refers to making profit by owning a stock and waiting for its value to increase in the market. A stock increases in value as investors are willing to bid more and more for it. This means that the more successful and popular a business is -- and the more positive the news concerning its industry -- the higher the price of the stock will rise. This appreciation allows the investor to eventually sell the stock back into the market and make an immediate profit.

Risk

Risk is a primary consideration between stock income and stock appreciation. Stock income is associated with low-risk investing. Because dividends are planned out and fairly reliable, investors do not worry as much about losing money when aiming for income benefits. But stock with strong dividends is usually very stable and appreciates little. Stock with high appreciation potential tends to be more risky; it's subject to frequent changes and produces few dividends. Stock can easily depreciate with bad news, which makes losing money a possibility as well.

A Wider Investment Picture

Income and appreciation do not have to apply only to stocks; they can affect many different securities. Investors often aim for either income or appreciation when dealing with all their investment choices. A person who wants to depend on income tends to choose bonds and other instruments that have strictly stated terms regarding returns and low risk. Investors who want to tackle appreciation prefer investing in stocks and securities that closely track market movements.

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