Simple Question - Income vs Accumulation
Posted: January 4th, 2022, 11:56 am
Forgive my ignorance but can someone answer a simple question to check my understanding as I have mainly been holding individual shares rather than funds. I am looking to switch my focus from income to growth but am confused that some growth funds pay dividends too.
Most funds have both Income or Accumulation, if the fund declares a dividend (as I assume most do) the main difference is for an accumulation its automatically reinvested so the number of units stay the same, but the value increased. Where as income you are paid in "cash" which can then be used to automatically reinvest to get more units but at a lower value.
The total value should remain pretty consistent, however accumulation will give a higher total return as there might be fees involved in taking an income and then reinvesting in the same fund by buying more units
(I ask this question as generally I let any income reinvest using HL's auto reinvest feature, however I like the option of moving income from one place into another if I am over exposed)
Most funds have both Income or Accumulation, if the fund declares a dividend (as I assume most do) the main difference is for an accumulation its automatically reinvested so the number of units stay the same, but the value increased. Where as income you are paid in "cash" which can then be used to automatically reinvest to get more units but at a lower value.
The total value should remain pretty consistent, however accumulation will give a higher total return as there might be fees involved in taking an income and then reinvesting in the same fund by buying more units
(I ask this question as generally I let any income reinvest using HL's auto reinvest feature, however I like the option of moving income from one place into another if I am over exposed)