Understanding different ETF share classes
Marketing Communication
When you invest1 in an ETF, you could choose between two types of share class: accumulating (acc) and distributing (dist). So what’s the difference between them, and why might this matter to you?
As the name suggests, an acc ETF share class accumulates any potential2 returns it generates. You don’t have to do anything – these proceeds are automatically reinvested into the ETF. The returns could come in the form of:• Dividends from stocks• Interest from bonds • Net asset value (NAV) appreciation due to market moves.
By contrast, a dist ETF distributes any proceeds to its investors on a regular basis (monthly, half yearly or annually)2.
This allows you to decide how to put the income stream from your investment to use.
One factor to consider with acc shares is that any returns are reinvested for you - you don’t need to do anything.
If you don’t require additional payments, acc shares are the simplest option, which also compound over the long term
If you have pressing financial requirements, however, dist shares could potentially offer you a regular stream of payments.
So if you need help with bills, fees or mortgages, dist shares could be considered.
Different countries tax income from ETF shares in slightly different ways. In most cases, however, you pay tax either on receipt of income (from dist shares) or when you sell ETF investments (with acc shares).
The amount of tax you pay usually depends on your other income in the tax year. It depends on each person's individual circumstances.
In essence, the difference between these ETF share classes is that acc shares could allow your income to grow with the rest of your investment; dist shares could give you an income to use as you see fit. The best choice for you will depend on your circumstances and your investment1 goals.
1 Investment involves risks. For more information, please refer to the Risk section below.2 Income is not guaranteed.
