Accumulation funds confusion

xylophone

BTW the dividend links didn't work for me.

Try http://www.trustnet.com/Factsheets/tnuk/FactSheet.aspx?fundCode=MGSHI&univ=O

Click on the Acc of the Class required then on dividend tab.

Similarly for Inc.

On Acc the November 30 Interest payment will be 0.474p per unit.


On Inc the Nov 30 interest payment will be 0.290p per unit held.

masonic

homerhotspur wrote: »

although the dividends link didn't work for me either, I found the info and noted that the dividends paid out on the acc version were higher then the inc version. I am now trying to get my head around this point!

You are probably looking at the dividend per unit, but you've already identified the unit price is different, so it should be expected that to maintain the same yield, the dividend per unit would have to be different too. Coming back to my previous example, if you bought 1000 units in fund A priced at £1 with a yield of 3%, they might announce a semi-annual dividend of 1.5p, so you would receive £15 twice a year. An equivalent fund, fund B, where you bought 100 units priced at £10 with a yield of 3% might announce a semi-annual dividend of 15p - 10 times higher - but you'd still receive £15.

homerhotspur

masonic wrote: »

They (acc vs. inc) are more or less the same because the charting tools are taking into account the accumulation of re-invested income. Comparing selling price (or current price) to purchase price, while not taking into account income, would be a deeply flawed way to measure performance.

It is that sort of thinking that has led to the misconception that someone who invested in the FTSE 100 at the start of 2000 is currently sitting on a loss.

Whilst I am sure it would be somewhat flawed, is it not the case that the current selling price of an acc unit would include the income as that has been re-invested to buy more shares etc? So, if I bought at 50p per unit and a year later it was 62p per unit , would this 12 p increase not , in effect, include the income figure?

masonic

homerhotspur wrote: »

Whilst I am sure it would be somewhat flawed, is it not the case that the current selling price of an acc unit would include the income as that has been re-invested to buy more shares etc? So, if I bought at 50p per unit and a year later it was 62p per unit , would this 12 p increase not , in effect, include the income figure?

Yes it would for an acc fund, but for an inc fund it would not. Acc funds are a special case where the unit price reflects the total return (capital gain+income) - and it is the total return that you need to compare when any of the securities being compared distributes income.

panter

As has been said, if you go into the income version and re-invest the income, it will work out almost exactly the same as being in the accumulation fund.

Broadly, if you want to withdraw the income, go into the income fund. If you want to re-invest the income, go into the accumulation fund.