Funds - Accumulator vs. Income?

dunstonh

The difference is about 0.01% a year and can go for and against so over time it will average out.

What happens on October 1st? What do I receive?

If you have elected to take the income, it will be paid to your bank account. If you have elected to have the income reinvested it will buy more units.

EdInvestor

rathernot wrote: »

Very possibly, only problem is that I (and I'm sure a great many people) don't have sufficient to invest to be able to get a balanced exposure going down the shares route.

Try this DIY approach to equity income investing:

http://www.fool.co.uk/specials/2006/specials060208.htm

Very low cost and low maintenance

jamesd

EdInvestor, that's an example of not getting a balanced exposure. It's largely FTSE 100, UK-centric. At 8-10% per investment you lose that much if one of them goes bankrupt or to almost no value, as seems to happen to a FTSE 100 company every decade or so.

Cost of switching between income and accumulation or between other different funds varies with the vendor. It's usually 0% at Hargreaves Lansdown for funds, sometimes 0.25%, rarely more.

rathernot

EdInvestor wrote: »

Try this DIY approach to equity income investing:

http://www.fool.co.uk/specials/2006/specials060208.htm

Very low cost and low maintenance

Still doesn't sound balanced?

If you take £1000, I can go to Interactive Investor and buy into as many funds as I want to at a minimum of £20 a fund.

That seems to give me huge exposure.

Now granted I can do much the same with shares with their £1.50 Portfolio Builder service, but given it's £10 to sell a share that, to me, suggests that unless I was in it for the long term:

a) As James said, one company crashes and burns and it has a big impact?

b) I still won't have anything like the exposure and balance that I would with a selection of funds?

dunstonh

funds give you the greatest diversification. A decent portfolio spread of just 10 funds can mean that you hold less than 1% in any one company. That is the positive of funds. You are spreading the risk. The downside is that they cost more than shares but with shares you need to be more hands on than with funds. Plus funds give you access to investment areas that you havent got or havent reasonably got with shares.

The are pros and cons with any type of investment. If you want diversification and limited exposure to any one company then you cant beat funds.