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I am 32 years old and have started to invest passively in low-fee stock ETFs: one global (VT) and one local Swiss ETF (CHSPI). However I was not sure whether to buy accumulating (dividends auto-reinvested) or distributing (dividends paid out automatically) ETFs. What are things I should consider to help inform my decision?

  • I guess the question is, do you need the money as income? If you have dividends paid to you, what would you do with them? – Robert Longson Jan 5 at 11:09
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    Whether you occasionally receive money or get it reinvested doesn't matter from a financial standpoint, but it can have significant tax differences (e.g. selling shares being more tax-efficient than receiving capital gains through dividends). – amon Jan 5 at 12:53
  • With the auto-reinvestment ETF, you can create "homemade dividends" by selling shares whenever you need cash. With the ETF that distributes dividends, you can reinvest by buying more shares with the dividends. As you can see, the auto-reinvestment ETF and the ETF that distributes dividends can be made equivalent. In practice, the differences will be due to tax. – Flux Jul 30 at 13:34
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Valid dilemma. It would depend on two things, the size of your portfolio/investment as well as whether you are paying taxes on dividends received. Should you portfolio is of considerable size and your income generated is meaningful, i.e you can use it to pursue other investments or to support your leaving expenses, then you should opt for a distributing class. Otherwise, you should perhaps consider an accumulated class to invest to, particularly if you have to declare any dividends paid as income in you tax declaration and get taxed on them.

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