Unit trust/OEIC is paying annual dividend!

autopetfeeder

I wish it were true....!

I've just began trickle feeding a new investment ftse-250 tracker fund. I thought it would make sense to ride out the peaks and troughs of the market.

However, its just occurred to me, that the fund (Fidelity UK Moneybuilder in this case) invests my money into shares BUT it keeps the dividends from those shares - along with the fee it charges.

So, my question is, wouldn't I get a better reward/risk ratio by investing directly in the companies that the tracker fund tracks? Since that way I'd be getting dividend bonues.

I'm sorry if this has been answered before, but everytime I did a search the results would show things about investment funds or share dividends but not this issue.

dunstonh

BUT it keeps the dividends from those shares

No it doesnt.

So, my question is, wouldn't I get a better reward/risk ratio by investing directly in the companies that the tracker fund tracks?

Not really. The theoretical advantage would be no annual management charge but you would be buying hundreds of shares, each with a dealing cost and you would have to rebalance these shares, incuring deal costs.

You are working on a wrong assumption though so its not really an issue.

If you have accumulation units, the unit price reflects the dividends paid within the fund. If you have income units, you get to see the income and you can have it paid out or reinvested to buy more units. The net effect is virtually the same (typically 0.01% p.a. difference in either direction depending on the way the markets move).