What is the difference between Accumulation and Income Funds? Acc vs Inc | Investing for Beginners
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In today's video you'll find out the difference between an Accumulation and an Income Fund, and which investment might be right for you to choose. Should you invest in an accumulation or an income fund? This is a key piece of information for beginner investors if you're looking to invest in funds. You will often see income and accumulation abbreviated to Acc or Inc, which can sometimes be confusing. I wanted to put some videos together, which cover off some basic information I had to either read in a personal finance book or google when I started investing for myself. I’m so excited to see my investment pot growing through investing and want to help others who may see some of the terminology used as a barrier to start investing. For your information I currently invest in Accumulation funds but may look to invest in Income funds in the future.
I’ve recently been listening to ‘How to Own the World’ by Andrew Craig and have chose to include a few sentences on this from his book as I feel as a whole that his book is wonderfully written and concise. I personally listened to this book on audible so have taken some notes down: ’One final aspect of funds to be aware of is the difference between accumulation and income funds. Shares often pay a dividend, if you own shares in a company that company will pay out a proportion of its profits to its shareholders usually twice a year, this is the dividend. As we have seen bonds also pay a percentage return known as a coupon. Dividends and coupons are collectively described as income. If you own a fund that generates income from dividends or coupons you can choose to have that income paid out to you in cash as would be the case in an income fund, or you can elect for that money to be ploughed back into units in the fund you own, this is called accumulation. Very often you’ll be able to choose between income or accumulation versions of the same fund.’ An example of an investment like this, which I’m currently invested, in is the Baillie Gifford American Fund, this fund is available as the Baillie Gifford American Accumulation fund or the Baillie Gifford American Income Fund.
‘Unless you need the money for example if you are retired it is best to choose to own the accumulation fund. Ploughing the income earned back into your fund will maximise the effect of compounding on how your money grows and is hugely important as a result.’
I personally choose to invest in Accumulation funds as at present we are not taking any money out of these investments and I am keen for the growth to compound. However my husband and I have dreams of retiring early to spend more time with our young children so perhaps in the future we may look to invest in Income Funds.
I hope you’ve found this video useful and it answers any questions you might have around Accumulation funds and Income funds. I would thoroughly recommend Andrew Craig’s book ‘How to Own the World’ and have popped a link down below for it. As I said I have listened to it on audible as its easier for me to do while driving but I’m sure the printed version is excellent too...
How to Own the World by Andrew Craig: amzn.to/3yx1GpY
If you have any suggestions for similar kinds of videos where I explain any basic terms within the investing niche then please do let me know.
I wish you all the best with your investments. **FREE SHARES**
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**Books I've Enjoyed**
How to Own the World by Andrew Craig: amzn.to/3yx1GpY
The Psychology of Money by Morgan Housel: amzn.to/3dzdAa3
I make videos on investing, personal finance, growing wealth, financial independence, budgeting and saving money. Let me know in the comments what you’d like to see next!
DISCLAIMER
Any information given in this video is for entertainment purposes only, and does not act as legal or financial advice. Your financial decisions are your own responsibility, and if you do require advice please contact a qualified Financial Adviser or Financial Planner.
Пікірлер: 46
Interesting terminology. In the US, we call it DRIP (dividend reinvestment program) where the brokerage will buy more shares with the dividend money automatically. Great video!
@creatingbalancefinance
3 жыл бұрын
Thanks so much!! Yes, same thing, different name 😊 I feel like all the different investing terminology can put beginners off. Thanks a million for watching Jonathan!
I could not agree more with your video. Very well articulated with clear and concise language. Look forward to your next video!! 😊
@creatingbalancefinance
3 жыл бұрын
Thank you so much! I really appreciate it 😊😊😊
@financeabcs
3 жыл бұрын
@@creatingbalancefinance 🙏
Thank you. I’m a speculator until I reach my goal. That book by Andrew Craig is a diamond.
@creatingbalancefinance
Жыл бұрын
It’s brilliant! Thank you for watching!
Very impressed with your color layouts
@creatingbalancefinance
3 жыл бұрын
Thank you!
So helpful! Thank you! 👍🏽
@creatingbalancefinance
3 жыл бұрын
Thank you so much for watching Bess!! Really appreciate it!!
I had to google what this was when I started! Great video and really helpful for people starting up!!
@creatingbalancefinance
3 жыл бұрын
Thank you so much!! Yes, I had to google it too! Among a few other terms 😂 Thanks a million for watching!!
@creatingbalancefinance
3 жыл бұрын
😃
Great breakdown, awesome vid!
@creatingbalancefinance
3 жыл бұрын
Thank you so much! Really appreciate it 😃😃😃
I personally prefer income funds, as while they do indeed pay out, there is nothing to stop you then reinvesting it if you choose. But more critically, if you see other opportunities to diversify, you can invest it in a different fund that may have potential to perform better, or simply prevent you having all your eggs in the same basket. I guess it depends on how much time you have to keep an eye on things. If you want to fire and forget than acc is the obvious choice. But if you want to be somewhat involved and have a good picture of the actual income you are currently generating, along with the ability to allocate that income as you see fit, then inc seems to make the most sense.
@creatingbalancefinance
Жыл бұрын
Thank you so much for watching and taking the time to comment too. Really interesting to hear your viewpoint on this. I tend to go with Acc but can see the benefits of both 😊👍
💭👍
@creatingbalancefinance
3 жыл бұрын
Thank you so much for watching!!!
Love your channel - deserve way more fillers in my opinion!
@creatingbalancefinance
2 жыл бұрын
That’s so kind of you to say! Thanks a million and thank you for following!! 😊👍
Thank you soo much for this straight forward explanation of what it is. 😂🙏🌟
@creatingbalancefinance
Жыл бұрын
Thank you so much Gail!
Thanks for making this view. I invite in a very minor way via a Lifetime ISA as well as a separate S&S ISA, both with HL. They have set these up so they automatically reinvest any dividend income. Im guessing that means that any income portfolios I invest into are effectively converted to accumulation due to this. I don't know much about the stock market, so I have played it safe with S&P500, Ftse100/250 etc, compounding £633 a month to get the max return from the Government and another £300 into the separate ISA, which is effectively my medium term fund to buy a car and fund my hobbies in the future.
Amazing thank you for this
@creatingbalancefinance
Жыл бұрын
My pleasure!
If you’re still looking for beginner questions I have one! I watch a few different KZreadrs who talk about investing and everyone says you should research the company you’re investing in but they also say the best thing is to invest in funds that cover lots of companies. So are we supposed to research every company that’s covered in every fund? Because who has time for that?! I haven’t found any advice on how to choose a fund. There’s SO many of them and a lot of them are just a mish-mash of letters and numbers. How do you narrow down your choice? I’m starting to understand and get familiar with some of it but it still feels a bit like I’m trying to order my dinner off a menu written in Greek!
@creatingbalancefinance
Жыл бұрын
Thanks so much for the great question. As a beginner it probably does make the most sense to invest in a fund. In terms of which fund to invest in I wouldn’t want to advise you on this as I’m currently not a financial advisor as I’m still doing my exams, also I’m not sure of your risk level and long term goals. As a beginner I’d start out by investing in An ETF of index funds, these are funds that track a specific market for example VUSA tracks the S&P 500. This fund has the top 500 US companies in it. As you say it would take a lot of time to research all 500 companies. I personally don’t research every company in the funds I invest in. If I’m looking to buy an individual stock I’d do much more research and read their financial reports. Wishing you all the very best and thanks for the fab question.
Let me know if you have any ideas for other videos like this one! 😊 thank you so much for watching 😊
For example: The assets return 10% annually, 7% as capital gains and 3% as dividends. DIST etf pays this 3% to investors as a dividend distribution aś cash, but does this DIST etf has also compounding effect for future with this 7% or not?
how does the accumulation fund show an increase to your account as you still have the same shares. Is it via the share price?
If you invest in Acc funds, then you get to retirement, do you sell your Acc funds and buy Inc of the same fund? Is there any downside to doing this?
@creatingbalancefinance
3 ай бұрын
Thanks so much for watching. I plan to just sell some of my Acc funds in retirement rather than attempting to live off dividends. That’s just my plan though 😊 wishing you all the very best 😊
Why would you invest in income funds when you retire? Why would you not just sell off some of the assets from the accumulation fund. Surely it works the same?
@creatingbalancefinance
2 жыл бұрын
Thanks so much for watching. I personally only inverts in accumulation funds and plan to sell them off in retirement/ when required 👍
liked
@creatingbalancefinance
3 жыл бұрын
Thank you so much!
With accumulation funds...does that mean it buys more shares? Or the shares you already have increase in value?
@lukeedwards3777
Жыл бұрын
In an accumulation fund, the dividends are reinvested into purchasing more shares in the companies that the fund holds. This will not increase the amount of units that you have, but rather will increase the share value. Because it is reinvested it will mean you own more shares in each individual company and thus are returned more and more dividends and this cycle carries on. Time is the biggest factor in determining how the power of compounding will work, not the amount of money you put in.
Hi, can I have an income fund and accumulation fund in my portfolio?
@creatingbalancefinance
7 ай бұрын
Yes, you can hold both income and Acc in a single portfolio. Thanks so much for watching
No mention of the different class systems.
@creatingbalancefinance
Жыл бұрын
Thanks for watching!