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A fund that reinvests any profit you make, which increases the number of units you hold in the fund over time.
An accumulation fund is a fund that gathers up your profits and reinvests them into the fund, which increases the number of units you hold in the fund over time. The tradeoff for this is that you won’t receive earnings in the present, but you will hopefully end up with a larger investment over time, which could help to increase your future gains.
Accumulation funds don’t pay dividends. Other assets do though, like income funds and some stocks. The best way to find out whether an investment pays dividends is to research each one on an individual basis.
There’s no set timetable for when accumulation funds reinvest their profits. Some will reinvest profits annually, and other fund providers don’t even disclose their reinvestment schedules. The best way to find this information out is by reading the fund’s key investor information document (KIID).
The difference between income and accumulation funds is that while an accumulation fund will automatically reinvest your profit back into the fund to increase your holding in the future, an income fund will pay that profit out to your bank account – providing you with an income in the present.
All of the funds we offer at Moneybox are accumulation funds, except for our ESG S&P 500 ETF, and our Global Clean Energy ETF – which are income funds.
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest.