Income vs accumulation funds

artha

When choosing funds purely with the aim of capital growth does it matter whether the fund is income or accumulation as long as yields are reinvested?

Are there any other pitfalls for the novice to be aware of when this is done through Hargreaves Lansdown?

bendix

My understanding (perhaps wrong, so take it with a pinch of salt) is that with accumulation funds the funds are automatically reinvested for you and that this is reflected in the higher unit price. If you look at the difference in accumulation v income units for the same fund, you will notice that the price of accumulation units is significantly higher. This is because the income or yield or dividend or whatever is factored into the unit price.

With income units, the income is paid and is syphoned off to your Hargreaves Landsowne income account and then yuo have to physically rebuy units.

I THINK that's right. Don't accept it as gospel. I'm sure dunstonh can advise more accurately.

Alternatively, try calling them. I've found them very helpful.

I have recently filled by S&S ISA allowance with them, and have followed up with a £15000 lump some in a variety of managed funds, some of which are income and some accumulation. I wondered the same thing, but in my case I'm just going to wait and see what happens when the first income is distributed.

nrsql

With h-l you can select to have the income reinvested automatically.
I think they do this once a monthy for values over £50 - so income will sit in your income account until it reaches £50. Could be a long time for low income or small values (years). Means you miss out on any gains during that period.

I believe fidelity doesn't have that limit so income is always reinvested reasonably quickly - think it might also happen within days rather than at a monthly period too.

Lokolo

bendix wrote: »

My understanding (perhaps wrong, so take it with a pinch of salt) is that with accumulation funds the funds are automatically reinvested for you and that this is reflected in the higher unit price. If you look at the difference in accumulation v income units for the same fund, you will notice that the price of accumulation units is significantly higher. This is because the income or yield or dividend or whatever is factored into the unit price.

With income units, the income is paid and is syphoned off to your Hargreaves Landsowne income account and then yuo have to physically rebuy units.

I THINK that's right. Don't accept it as gospel. I'm sure dunstonh can advise more accurately.

Alternatively, try calling them. I've found them very helpful.

I have recently filled by S&S ISA allowance with them, and have followed up with a £15000 lump some in a variety of managed funds, some of which are income and some accumulation. I wondered the same thing, but in my case I'm just going to wait and see what happens when the first income is distributed.

That is all correct.

Theres not much point in the income unless you need it (for example, retirement income)

artha

Lokolo wrote: »

That is all correct.

Theres not much point in the income unless you need it (for example, retirement income)

Although I've just taken early retirement I don't need income from investments so I have started to move spare low interest earning cash into several s&s funds for the longer term. Where accumulation units are available I choose these but in some cases there is only an income fund version e.g Jupiter Corporate Bond. I suppose my question now is might I have been better to have chosen a similar fund that is an accumulation fund?

dunstonh

Theres not much point in the income unless you need it (for example, retirement income)

Can be useful when you are not using a wrapper and need to keep the income and growth apart from a point of view of convenience when looking at CGT allowances.

Lokolo

dunstonh wrote: »

Can be useful when you are not using a wrapper and need to keep the income and growth apart from a point of view of convenience when looking at CGT allowances.

I was going to say that....

Isn't there also dividend tax to be considered with certain funds and ISA? I can't remember now.

Although I've just taken early retirement I don't need income from investments so I have started to move spare low interest earning cash into several s&s funds for the longer term. Where accumulation units are available I choose these but in some cases there is only an income fund version e.g Jupiter Corporate Bond. I suppose my question now is might I have been better to have chosen a similar fund that is an accumulation fund?

Yeh there are fewer Acc bond funds. I'm 20, don't need the income and am investing for growth, so Acc are perfect for me. I am picking only 1 Bond fund and yeh its going to be Acc so it severly limits my choices. But luckily M&G Strat Bond is Acc

artha

Lokolo wrote: »

I was going to say that....

Yeh there are fewer Acc bond funds. I'm 20, don't need the income and am investing for growth, so Acc are perfect for me. I am picking only 1 Bond fund and yeh its going to be Acc so it severly limits my choices. But luckily M&S Strat Bond is Acc

Lokolo
It would be nice to pop down to the shops and pick up a few bonds but I assume you mean M&G (not M&S). On the subject of this fund I see from the H&L site that it is shown as "Class X" units. Having obtained the M&G data sheet from another site I see that there are both "Sterling Share Class A" and "Sterling Share Class X". For the latter there is a "withdrawal fee". This is not mentioned in the H&L blurb. Do you (or anyone else) know what this means?

Lokolo

artha wrote: »

Lokolo
It would be nice to pop down to the shops and pick up a few bonds but I assume you mean M&G (not M&S). On the subject of this fund I see from the H&L site that it is shown as "Class X" units. Having obtained the M&G data sheet from another site I see that there are both "Sterling Share Class A" and "Sterling Share Class X". For the latter there is a "withdrawal fee". This is not mentioned in the H&L blurb. Do you (or anyone else) know what this means?

No. (I have also changed it to M&G lol)

Theres a few funds like it, usually A, I, X etc. I think that it depends how you are holding them, so one is for a pension, one for an ISA etc. I think X is the ISA one. (I think). Dunstonh will confirm later on if he gets his butt on here.

nrsql

If you say you want confirmation from a particular person why would anyone else reply.
http://www.mandg.co.uk/Consumer/FundInfo/Discounts/index.jsp

artha

nrsql wrote: »

Implying that you didn't want a response from anyone else. Should have PM'd him rather than posting publicly.

Thanks Lokolo + nrql for trying to answer my question but I can see that no one actually knows the answer as to what the exit charge is and why it isn't mentioned on the H&L site (as far as I can see). I'll phone H&L tomorrow to try and find out and post the result