Income vs accumulation funds

turbobob

Please post up when you find out Artha. If an early exit penalty applies it would suggest to me that H-L were taking initial commission on M&G funds.

bendix

nrsql wrote: »

I didb't take it offensively - I'm just saddened when on a peer to peer help forum people get promoted as authorities. It's very dangerous and devalues the site.

Ummmmm . but he IS an authority. He's a professional IFA, and the advice he gives here he would normally charge for in the real world. Frankly, I think that's valuable.

A peer to peer interconnection is great for discussing ideas, themes, suggestions etc, but if someone is asking for a definitive answer on a particular question, I would much prefer to hear a definitive answer from a professional, rather than what might be (admittedly) well-intentioned misinformation from an amateur.

That's why I - as an amateur - put the caveats in my early response on this thread.

SnowMan

If income is not taken then from personal experience I would always choose accumulation units over distribution units with reinvested income for the following practical reasons.

Accumulation units make valuation and understanding easier. The value is basically speaking number of units x price. With distribution units you have to take into account that your number of units increases after a distribution.

With accumulation units you generally do not need to worry about any issues of charges on re-investing the income back into the same fund.


For someone selling each year to use up their capital gains exemption limit the calculation of capital gains is from practical experience much easier using accumulation units than distribution units. My experience is the exact opposite of what dunston has stated. But as I am not a professional IFA I must be wrong :rotfl:

The practical advantage is that the dividends that are effectively reinvested within accumulation units are treated as an increase to the original purchase price for the capital gains calculation. This makes the accurate calculation, sale proceeds less purchase amount less income reinvested (obtainable from tax vouchers) with adjustment for equalisation a simple calculation once you have done it once. And the simple check if selling below the capital gains limit is sale proceeds less purchase price.

With distribution units each reinvested dividend is treated as a new purchase on the date the money is reinvested, hence to do an accurate calculation requires multiple calculations with multiple dates. And the simple calculation is not always so simple. When you enter the complications of further investments in the same fund the calculation becomes horrendous using the distribution unit approach, but is still relatively straightforward with the accumulation unit approach.

nrsql

bendix wrote: »

Ummmmm . but he IS an authority. He's a professional IFA, and the advice he gives here he would normally charge for in the real world. Frankly, I think that's valuable.

I've no evidence of that have you?
Also do you know the profession of the other posters (or more importantly experience?).

Shame this is sounding like dunstonh bashing who does often give valuable opinion but everyone here (and in life) gives opinion based on their limited experience and everyone is deficient in some areas. Accepting opinion due to where it comes from just opens you up to scams.

bendix

it seems you have an axe to grind which goes way beyond the scope of this thread.

in which case, I shall gracefully depart, whilst mumbling under my breath "what the hell is this guy's problem?"

artha

turbobob wrote: »

Please post up when you find out Artha. If an early exit penalty applies it would suggest to me that H-L were taking initial commission on M&G funds.

Phoned H&L. An exit charge does exist for M&G Class X investments but only when held directly with M&G and when the stock/fund value is moved out of M&G management.

Lokolo

artha wrote: »

Phoned H&L. An exit charge does exist for M&G Class X investments but only when held directly with M&G and when the stock/fund value is moved out of M&G management.

So if you sold your investments with HL the exit fee wouldn't apply? (within the 5 year barrier)

nrsql

bendix wrote: »

it seems you have an axe to grind which goes way beyond the scope of this thread.

in which case, I shall gracefully depart, whilst mumbling under my breath "what the hell is this guy's problem?"

No axe and I'm the one that's taking this thread in isolation rather than taking history into account,

I'll also depart as this doesn't seem to be going anywhere and looks like is becoming personal.
Might see if I can delete all my posts on this is they don't seem to have been taken in the spirit meant.

artha

Lokolo wrote: »

So if you sold your investments with HL the exit fee wouldn't apply? (within the 5 year barrier)

Correct. They would be treated in the same way as any other fund sale with H&L

MakeDosh

Hi,

I was following this thread about accumulation vs income units. There is another thing, perhaps, to consider that has a sting in the tail! That is X units vs A units.

The TER for X units is often higher (can be by a factor of 20%) this is probably to offset the no upfront loading. However if you are purchasing a fund through a supermarket or broker that discounts the upfront commission to zero then the class A unit is likely to provide a better return than a class X.

Unsurprisingly it may be found that the class A unit is not offered alongside the Class X - probably due to decreased renewal commission for the agent?

Best to check.