You may have seen the acronym ‘Acc’ or ‘Inc’ in the fund names of open-ended investment funds, or heard the terms ‘accumulation’ or ‘distribution’ in respect of share classes, however what do these mean?
Accumulation and distribution are types of share classes of open-ended funds and are intended to show how the specific share class treats income received by the fund and whether it is distributed to shareholders.
Income could be interest from cash deposits or bonds, or could be dividends from stocks; this is received by the fund from its underlying holdings and the ‘Acc’ and ‘Inc’ defines how the fund deals with this income.
Distributing share classes, or income share classes, pay out this income on a periodic basis as cash to shareholders.
Accumulation share classes reinvest the income received back into the fund and do not distribute to shareholders. This can then be used to generate additional capital growth and income.
Whether an income or accumulation share class is appropriate to you depends on whether you require an income from the investment or whether you are seeking capital growth.
