Re-Invest Or Withdraw? Accumulation Versus Income Funds

Re-Invest Or Withdraw? Accumulation Versus Income Funds

“Mutual funds were created to make investing easy, so consumers wouldn’t have to be burdened with picking individual stocks” ― Scott Cook

3 min read

Dividend Investing vs. Income Withdrawals - Accumulation - Compounding - Investments

Re-Invest Or Withdraw? Accumulation Versus Income Funds

“Mutual funds were created to make investing easy, so consumers wouldn’t have to be burdened with picking individual stocks” ― Scott Cook

3 min read

Within the world of mutual funds and exchange-traded funds (ETFs), you will often have the choice to opt for accumulation or income.

What’s the difference you may ask?

Put simply, accumulation funds re-invest any income or dividends generated by the underlying assets back into the fund.

On the other hand, income funds distribute any income generated by the underlying assets to you, the investor. This is often in the form of cash dividends or interest payments.

However, just knowing what these are is not necessarily enough to make informed decisions on your investments. Which type is suitable for you? What are the benefits? Read on to find out!

Accumulation Funds

Accumulation funds, often shortened to ‘Acc’ or known as ‘capital growth’ funds, are designed for those who wish to re-invest any income back into the fund in which they are invested.

With this type of investment, the process is automatic and any dividends, interest payments or other distribution types will be re-invested without you having to do anything (at least, nothing beyond buying into the fund in the first place!).

Why might you wish to do this? Because you will benefit from compound growth over time that could have a huge impact on the gains you see when you come to withdraw in the future!

As an example, should you have CHF 1’000 invested and receive a CHF 100 distribution (e.g. as a dividend payment), you would then have CHF 1’100 invested (if you did not take it as income). This is CHF 100 more that can potentially increase both your returns and even future distribution payments.

The longer you leave your funds, the more time this type of approach has to grow your wealth. Hence, this strategy is typically better-suited if you have a longer-term investment horizon and prioritise capital appreciation.

Income Funds

Income funds, you will not be surprised to read, are also sometimes known under another name!

Not only are the often shortened to ‘Inc’, they are alternatively known as ‘distribution’ funds (sometimes shortened to ‘Dist’). As mentioned, these types of investment provide regular income paid out as dividends, interest or through other means.

Income funds are generally more suitable for when you are retired or if you are relying on investment income to cover defined living expenses.

Naturally, this makes the key advantage of income funds exactly that: their ability to provide a steady stream of income. 

What’s more, this income is provided to you without the need to sell off your shares!

Which One Is Right For You?

Now you know what both types of funds are, who they may be more suitable for and how they could benefit you.

This then leaves the question: which one should you choose?

Naturally, each of you reading this will be unique and there is no one-size-fits-all answer.

So, when deciding between accumulation or income funds, consider your investment objectives, risk tolerance and income needs. If you have quite some time before you wish to access your investments, you may be more suited to accumulation funds. On the other hand, income funds provide a regular income that you may prefer.

However, in both cases, assess any tax implications, fees and the benefits you may receive from compounding, or the potential drawbacks if you take the income out of the investment.

Here For You

There are more considerations than those which are in this article, and so you are must do your own research before making any decisions.

Yes, it can be complex, but Patterson Mills are here to help and explain your options in a jargon-free manner that ensures your complete understanding of your most effective route forward.

So, get in touch with Patterson Mills and book your initial, no-cost and no-obligation meeting. Your future financial success is our priority!

Send us an e-mail to or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.