Here are two trackers running on the same index:

One's denominated an "Accumulation" fund, the other "Income". What I expect from those names is that the former will compound any dividends received into the value of the fund, and the latter will pay the dividends out. That would mean that the "Accumulation" fund should have an exponentially higher value over time. That's not what the charts shows, though: they track each others' values very closely.

What's going on here?


Whenever a website mentions Hypothetical Growth of $100, $1,000, or $10,000, it assumes that that investor himself will reinvest the dividend. This is true whether you look at Morningstar or Financial Times.

Unless the website does not have dividend data, e.g. Google Finance.

If you want to compare the account value after withdrawing dividends:

enter image description here

Since the Income class pays dividends annually, there will be 1 jumps per year.

For example, the 2013 dividend payment:

enter image description here

and the 2014 dividend payment:

enter image description here

  • That all makes sense, but the red line you've shown here is what I would expect the "Accumulation" fund to look like. It doesn't. Have I misinterpreted the names of the funds?
    – regularfry
    Mar 22 '15 at 3:00
  • By jump, I mean jump down. Red is Accumulation, Blue is Income.
    – base64
    Mar 22 '15 at 7:25
  • OK, the same question applies. The charts I've linked to have no jumps relative to each other in either direction. I don't get why overlaying the two funds I've posted doesn't give exactly the same charts that you've just posted.
    – regularfry
    Mar 22 '15 at 11:07
  • The charts I showed assumes that the Income class investor withdraws the dividend from the Investment Account to his Bank Account, and spends it all or never put it back into the Mutual Fund. The charts you linked assumes that 1 minute after receiving dividend, he puts it back into the Investment Account by buying a tiny fraction of unit of Mutual Fund.
    – base64
    Mar 22 '15 at 13:57
  • Correct me if I'm wrong. But even reinvesting the dividend after collecting it, 'Income' wouldn't match the performance of the Accumulation one, due to paying taxes on the dividend, right? I mean, we're assuming tax-free dividends, which is the case of the Accumulation one, as it never reaches the investor. May 4 '15 at 0:34

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